[No. L-8721.
May 23, 1957]
TRANQUILINO CACHERO, plaintiff and appellant, vs.
MANILA YELLOW TAXICAB Co., INC., defendant and
appellant.
1.CONTRACT OF CARRIAGE; BREACH OF; DAMAGES; AGAINST
WHOM THE ACTION MUST BE MAINTAINED TO RECOVER
MORAL DAMAGES.—
While under the law, employers are made responsible for the
damages caused by their employees acting within the scope of
their assigned task, plaintiff, in the present case, does not
maintain his action against all the persons who might be liable
for the damages caused but on an alleged breach of contract of
carriage and against the defendant employer alone. However,
the defendant taxicab company has not committed any criminal
offense resulting in physical injuries against the plaintiff. The
one that committed the offense against plaintiff is the driver of
defendant's taxicab but he was not made party defendant to the
case. Therefore, plaintiff is not entitled to compensation for
moral damages as his case does not come within the exception
of paragraph 1 of Article 2219 of the Civil Code.
2.ID. ; ATTORNEY'S FEES ; WHEN MAY BE RECOVERED ; CASE
AT BAR.—The present case does not come under any of the
exceptions enumerated in Article 2208 of the Civil Code,
specially of paragraph 2 thereof, because defendant's failure to
meet its responsibility was not the cause that compelled the
plaintiff to litigate or to incur expenses to protect his interests.
The present action was instituted because plaintiff demanded
an exorbitant amount for moral damages and naturally the
defendant did not and could not yield to such demand. This is
neither a case that comes under paragraph 11 of said Article
because the Lower Court did not deem it just and equitable to
award any amount for attorney's fees, on which point this Court
agrees.
APPEAL from a judgment of the Court of First Instance of
Manila. Macadaeg, J.
The facts are stated in the opinion of the Court.
Bernardino Guerrero and /. G. Madarang for plaintiff and
appellant.
Castaño & Ampil for the defendant and appellant.
FÉLIX, J.:
There is no dispute as to the following facts: on December 13,
1952, Atty. Tranquilino F. Cachero boarded a Yellow Taxicab,
with plate No. 2159-52 driven by Gregorio Mira Abinion and
owned by the Manila Yellow Taxicab Co., Inc. On passing
Oroquieta between Doroteo
José and Lope de Vega streets, Gregorio Mira Abinion bumped
said taxicab against a Meralco post, No. 1-4/387, with the result
that the cab was badly smashed and the plaintiff fell out of the
vehicle to the ground, suffering thereby physical injuries, slight
in nature.
The chauffeur was subsequently prosecuted by the City Fiscal
and on February 26, 1953, upon his plea of guilty the Municipal
Court of Manila sentenced him to suffer 1 month and 1 day of
arresto mayor, and to pay the costs.
On December 17, 1952, Tranquilino F. Cachero addressed a
letter to the Manila Yellow Taxicab Co., Inc., which was followed
by another of January 6, 1953, which reads as follows:
"MANILA, January 6, 1953
The MANILA YELLOW TAXICAB Co., INC.
1338 Arlegui, Manila
Dear Sirs:
As you have been already advised by the letter dated December
17, 1952, on December 13, 1952, while I was a passenger of
your taxicab bearing plate No. 2159 and driven by your
chauffeur Gregorio Mira and through his negligence and the bad
condition of the said car, he bumped the same against the
pavement on the street (Oroquieta—between Doroteo Jose and
Lope de Vega streets, Manila) and hit the Meralco post on said
street, resulting in the smashing of the said' taxicab, and as a
result thereof I was gravely injured and suffered and is still
suffering physical, mental and moral damages and not being
able to resume my daily calling.
For the said damages, I hereby make a demand for the payment
of the sum of P79,245.65, covering expenses for transportation
to the hospital for medical treatment, medicines, doctors bills,
actual monetary loss, moral, compensatory and exemplary
damages, etc., within 5 days from date of receipt hereof.
I trust to hear from you on the matter within the period of 5 days
above specified.
Truly yours,
(Sgd.) TRANQUILINO F. CACHERO
2256 Int. B, Misericordia St.,
Sta. Cruz, Manila"
(Exhibit K)
The Taxicab Co. to avoid expenses and time of litigation offered
to settle the case amicably with plaintiff but the latter only
agreed to reduce his demand to the sum of P72,050.20 as his
only basis for settlement which, of course, was not accepted by
said company. So plaintiff instituted this action on February 2,
1953, in the Court of First Instance of Manila, praying in the
complaint that the defendant be condemned to pay him:
"(a) The sum of P72,050.20, the total sum of the itemized losses
and/or damages under paragraph 7 of the complaint, with legal
interest thereon from the date of the filing of the complaint;
(b) The sum of P5,000 as attorney's fee; and the costs of the suit;
and
Plaintiff further respectfully prays for such other and further
reliefs as the facts and the law pertaining to the case may
warrant."
The defendant answered the complaint setting forth affirmative
defenses and a counterclaim for P930 as damages and praying
for the dismissal of plaintiff's action. After hearing the Court
rendered decision only July 20, 1954, the dispositive part of
which is as follows:
"IN VIEW OF THE FOREGOING, the Court hereby renders
judgment in favor of the plaintiff and against the defendant,
sentencing the latter to pay the former the following: (1) For
medicine, doctor's fees for services rendered and transportation,
P700; (2) professional fee as attorney for the defendant in
Criminal Case No. 364, 'People vs. Manolo Maddela et al., of the
Court of First Instance of Nueva Vizcaya, P3,000; (3)
professional fees as attorney for the defendant in Civil Case No.
23891 of the Municipal Court of Manila, 'Virginia Tangulan vs.
Leonel da Silva,' and for the taking of the deposition of Gabina
Angrepan in a case against the Philippine National Bank, P200;
and (4) moral damages in the amount of P2,000.
Defendant's counterclaim is hereby dismissed.
Defendant shall also pay the costs."
From this decision both parties appealed to Us, plaintiff limiting
his appeal to the part of the decision which refers to the moral
damages awarded to him which he considered inadequate, and
to the failure of said judgment to grant the attorney's fees asked
for in the prayer of his complaint. Defendant in turn alleges that
the trial Court erred in awarding to the plaintiff the following:
"(1) P700—for medicine, doctor's fees and transportation
expenses;
(2) P3,000—as supposedly unearned full professional fees as
attorney for the defendant in Criminal Case No. 364, 'People vs.
Manolo Maddela et al.';
(3) P200—as supposedly unearned professional fees as attorney
for the defendant in Civil Case No. 23891 of the Manila
Municipal Court, 'Virginia Tangulan vs. Leonel de Silva', and for
failure to take the deposition of a certain Gabina Angrepan in an
unnamed case; and
(4) P2,000—as moral damages, amounting to the grand total of
P5,900, these amounts being very much greater than what
plaintiff deserves."
In connection with his appeal, plaintiff calls attention to the
testimonies of Dr. Modesto S. Purísima and of Dr. Francisco
Aguilar, a member of the staff of the National Orthopedic
Hospital, which he considers necessary as a basis for
ascertaining not only the physical sufferings undergone by him,
but also for determining the adequate compensation for moral
damages that he should be awarded by reason of said accident.
The exact nature of plaintiff's injuries, their degree of
seriousness and the period of his involuntary disability can be
determined by the medical certificate (Exhibit D) issued by the
National Orthopedic Hospital on December 16, 1952, and the
testimonies of Dr. Francisco Aguilar, physician in said hospital,
and of Dr. Modesto Purísima, a private practitioner. The medical
certificate (Exhibit D) lists: (a) a subluxation of the right
shoulder joint; (b) a contusion on the right chest; and (c) a
"suspicious fracture" of the upper end of the right humerus. Dr.
Aguilar who issued the medical certificate admitted, however,
with regard to the "suspicious fracture", that in his opinion with
(the aid of) the x-ray there was no fracture. According to this
doctor plaintiff went to the
National Orthopedic Hospital at least six times during the period
from December 16, 1952, to April 7, 1953; that he strapped
plaintiffs body (see Exhibit E), which strap was not removed
until after a period of six weeks had elapsed. Dr. Modesto
Purísima, a private practitioner, testified that he advised, and
treated plaintiff from December 14, 1952, to the end of March
(1953). Plaintiff was never hospitalized for treatment of the
injuries he received in said accident.
Counsel for the defendant delves quite extensively on these
injuries. He says in his brief the following:
"Just what is a subluxation? Luxation is another term for
dislocation (Dorland, W.A.N., The American Illustrated Medical
Dictionary (13th ed.), p. 652), and hence, a subluxation is an
incomplete or partial dislocation (Ibid., p. 1115). While a
dislocation is the displacement of a bone or bones from its or
their normal setting (and, therefore, applicable and occurs only
to joints and not to rigid or non-movable parts of the skeletal
system) (Ibid., p. 358; Christopher, F., A Textbook of Surgery
(5th ed.), p. 342), it should be distinguished from a fracture
which is a break or rupture in a bone or cartilage, usually due
to external violence (Christopher, F., A Textbook of Surgery (5th
ed.), p. 194; Dorland, W.A.N., The American Illustrated Medical
Dictionary (13th ed.), p. 459). Because, unlike fractures which
may be partial (a crack in the bone) or total (a complete break in
the bone), there can be no half-way situations with regard to
dislocations of the shoulder joint (the head or ball of the
humerus—the humerus is the bone from the elbow to the
shoulder) must be either inside the socket of the scapula or
shoulder blade (in which case there is no dislocation) or out of
the latter (in which event there is a dislocation), to denote a
condition where due to external violence, the muscles and
ligaments connecting the humerus to the scapula have
subjected to strain intense enough to produce temporary
distension or lessening of their tautness and consequently
resulting in the loosening or wrenching of the ball of the
humerus from its snug fit in the socket of the scapula, by using
the terms subluxation or partial dislocation (as used in the
medical certificate), is to fall into a misnomer—a term often used
by chiropractors' and by those who would want to sound
impressive, but generally unfavored by the medical profession.
To describe the above condition more aptly, the medical
profession usually employs the expression luxatio im perfecta,
or, in simple language, a sprain (Dorland, W.A.N., The American
Illustrated Medical Dictionary (13th ed.), p. 652). The condition
we have described is a paraphrase of the definition of a sprain.
Plaintiff suffered this very injury (a sprained or wrenched
shoulder joint) and a cursory scrutiny of his x-ray plates
(Exhibits A and B) by a qualified orthopedic surgeon or by a
layman with a picture or x-ray plate of a normal shoulder joint
(found in any standard textbook on human anatomy; the one we
used was Scheffer, J.P., Morris' Human Anatomy (10 ed., p. 194)
for comparison will bear out our claim.
Treatment for a sprain is by the use of adhesive or elastic
bandage, elevation of the joint, heat, effleurage and later
massage (Christopher, F., A Textbook of Surgery (5th ed., p.
116). The treatment given to the plaintiff was just exactly that
Dr. Aguilar bandaged (strapped) plaintiff's right shoulder and
chest (t.s.n., p. 31) in an elevated position (with the forearm
horizontal to the chest (see photograph, Exhibit E), and certain
vitamins were prescribed for him (t.s.n., p. 131). He also
underwent massage for some time by Drs. Aguilar and Purísima.
The medicines and appurtenances to treatment purchased by
plaintiff from the Orthopedic Hospital, Botica Boie and Metro
Drug Store were, by his own admission, adhesive plaster,
bandage, gauze, oil and 'tintura arnica' (t.s.n., p. 3—
continuation of transcript), and Dr. Purísima also prescribed
'Numotizin', a heat generating ointment (t.s.n., p. 23), all of
which are indicated for a sprain, and by their nature, can cure
nothing more serious than a sprain anyway. Fractures and true
dislocations cannot be cured by the kind of treatment and
medicines which plaintiff received. A true dislocation, for
instance, is treated by means of reduction through traction of
the arm until the humeral head returns to the proper position
in the scapular socket (pulling the arm at a 60 degree angle and!
guiding the ball of the humerus into proper position, in its
socket) while the patient is under deep anaesthesia, and then,
completely immobilizing the part until the injured capsule has
healed (Christopher, F., A Textbook of Surgery, pp. 343 and
344). No evidence was submitted that plaintiff ever received the
latter kind of treatment. Dr. Purísima even declared that after
the plaintiff's first visit to the Orthopedic Hospital the latter
informed him that there was no fracture or dislocation (t.s.n., p.
26). Dr. Purísima's statement is the truth of the matter as we
have already explained—joints of the shoulder being only
subject to total dislocation (due to their anatomical design), not
to partial ones, and any injury approximating dislocation but
not completely, it being classified as mere sprains, slight or bad.
The second and last injury plaintiff sustained was a contusion.
What is a contusion? It is just a high flown expression for a
bruise or the act of bruising (Dorland, W.A.N., The American
Illustrated Medical Dictionary (13th ed., p. 290). No further
discussion need be made on this particular injury since the
nature of a bruise is of common knowledge (it's a bit
uncomfortable but not disabling- unless it occurs on movable
parts like the fingers or elbow, which is not the case herein
having occurred in the right chest) and the kind of medical
treatment or help it deserves is also well known." (pp. 10-14,
defendant-appellant's brief).
The trial Judge undoubtedly did not give much value to the
testimonies of the doctors when in the statement of facts made
in his decision he referred to the physical injuries received by
the plaintiff as slight in nature and the latter is estopped from
discussing the same in order to make them appear as serious,
because in the statement of facts made in his brief as appellant,
he says the f ollowing:
"The facts of the case as found by the lower court in its decision,
with the permission of this Honorable Court, we respectfully
quote them hereunder as our STATEMENT OF FACTS for the
purpose of this appeal."
Before entering into a discussion of the merits of plaintiff's
appeal, We will say a few words as to the nature of the action on
which his demand for damages is predicated.

"The nature of an action as in contract or in tort is determined
from the essential elements of the complaint, taken as a whole,
in the case of doubt a construction to sustain the action being
given to it.
While the prayer for relief or measure of damages sought does
not necessarily determine the character of the action, it may be
material in the determination of the question and therefore
entitled to consideration and in cases of doubt will often
determine the character of the action and indeed there are
actions whose character is necessarily determined thereby." (1
C.J.S. 1100)
A mere perusal of plaintiffs complaint will show that his action
against the defendant is predicated on an alleged breach of
contract of carriage, i.e., the failure of the defendant to bring him
"safely and without mishaps" to his destination, and it is to be
noted that the chauffeur of defendant's taxicab that plaintiff
used when he received the injuries involved herein, Gregorio
Mira, has not even been made a party defendant to this case.
Considering, therefore, the nature of plaintiffs action in this
case, is he entitled to compensation for moral damages? Article
2219 of the Civil Code says the following: ,
"ART. 2219. Moral damages may be recovered in the following
and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
(3) Seduction, abduction, rape, or other lascivious acts;
(4) Adultery or concubinage;
(5) Illegal or arbitrary detention or arrest;
(6) Illegal search;
(7) Libel, slander or any other form of defamation;
(8) Malicious prosecution;
(9) Acts mentioned in Article 309;
(10) Acts and actions referred to in Articles 21, 26, 27, 28, 29,
30, 32, 34 and 35.
* * * * * * *"
Of the cases enumerated in the just quoted Article 2219 only the
first two may have any bearing on the case at bar. We find,
however, with regard to the first that the defendant herein has
not committed in connection with this case any "criminal offense
resulting in physical injuries". The one that committed the
offense against the plaintiff is Gregorio Mira, and that is why he
has been already prosecuted and punished therefor. Although
(a) owners and managers of an establishment or enterprise are
responsible for damages caused by their employees in the
service of the branches in which the latter are employed or on
the occasion of their functions; (b) employers are likewise liable
for damages caused by their employees and household helpers
acting within the scope of their assigned task (Article 2180 of
the Civil Code); and (c) employers and corporations engaged in
any kind of industry are subsidiarily civilly liable for felonies
committed by their employees in the discharge of their duties
(Art. 103, Revised Penal Code), plaintiff herein does not maintain
this action under the provisions of any of the articles of the codes
just mentioned and against all the persons who might be liable
for the damages caused, but as a result of an admitted breach
of contract of carriage and against the defendant employer
alone. We, therefore, hold that the case at bar does not come
within the exception of paragraph 1, Article 2219 of the Civil
Code.
The present complaint is not based either on a "quasidelict
causing physical injuries" (Art. 2219, par. 2, of the Civil Code).
From the report of the Code Commission on the new Civil Code
We copy the following:
""A question of nomenclature confronted the Commission. After
a careful deliberation, it was agreed to use the term 'quasi-delict'
for those obligations which do not arise from law, contracts,
quasicontracts, or criminal offenses. They are known in Spanish
legal treatises as 'culpa aquiliana', 'culpa-extra-contractual' or
'cuasidelitos'. The phrase 'culpa-extra-contractual' or its
translation 'extra-contractual fault' was eliminated because it
did not exclude quasi-contractual or penal obligations. 'Aquilian
fault' might have been selected, but it was thought inadvisable
to refer to so ancient a law as the 'Lex Aquilia'. So 'quasi-delicts'
was chosen, which more nearly corresponds to the Roman Law
classification of obligations, and is in harmony with the nature
of this kind of liability." "The Commission also thought of the
possibility of adopting the word 'tort' from Anglo-American law.
But 'tort' under that system is much broader than the Spanish-
Philippine concept of obligations arising- from non-contractual
negligence. 'Tort' in Anglo-American jurisprudence includes not
only negligence, but also intentional criminal acts, such as
assault and battery, false imprisonment and deceit. In the
general plan of the Philippine legal system, intentional and
malicious acts are governed by the Penal Code, although certain
exceptions are made in the Project." (Report of the Code
Commission, pp. 161-162).
In the case of Cangco vs. Manila Railroad, 38 Phil. 768, We
established the distinction between obligation derived from
negligence and obligation as a result of a breach of a contract.
Thus, We said:
"It is important to note that the foundation of the legal liability
of the defendant is the contract of carriage, and that the
obligation to respond for the damage which plaintiff has suffered
arises, if at all, from the breach of that contract by reason of the
failure of defendant to exercise due care in its performance. That
is to say, its liability is direct and immediate, differing essentially
in the legal viewpoint from that presumptive responsibility for
the negligence of its servants, imposed by Article 1903 of the
Civil Code (Art. 2180 of the new), which can be rebutted by proof
of the exercise of due care in their selection or supervision.
Article 1903 is not applicable to obligations arising EX
CONTRACTU, but only to extra-contractual obligations—or to
use the technical form of expression, that article relates only to
CULPA AQUILIANA and not to CULPA CONTRACTUAL."
The decisions in the cases of Castro vs. Acro Taxicab (82 Phil.,
359, 46 Off. Gaz., No. 5, p. 2023) ; Lilius et al. vs. Manila
Railroad, (59 Phil. 758) and others, wherein moral damages were
awarded to the plaintiffs, are not applicable to the case at bar
because said decisions were rendered before the effectivity of the
new Civil Code (August 30, 1950) and for the further reason that
the complaints filed therein were based on different causes of
action.
In view of the foregoing the sum of P2,000 awarded as moral
damages by the trial Court has to be eliminated, for under the
law it is not a compensation awardable in a case like the one at
bar.
As to plaintiff's demand for P5,000 as attorney's fees, the Civil
Code provides the following:
"ART. 2208. In the absence of stipulation, attorney's fees and
expenses of litigation, other than judicial costs, cannot be
recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to
protect his interest;
(3) In criminal cases of malicious prosecution against the
plaintiff;
(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;
(5) Where the defendant acted in gross and evident bad faith in
refusing to satisfy the plaintiff's plainly valid, just and
demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers,
laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and
employer's liability laws;
(9) In a separate civil action to recover civil liability arising from
a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and
equitable that attorney's fees and expenses of litigation should
be recovered.
In all cases, the attorney's fees and expenses of litigation must
be reasonable."
The present case does not come under any of the exceptions
enumerated in the preceding article, specially of paragraph 2
thereof, because defendant's failure to meet its responsibility
was not the cause that compelled the plaintiff to litigate or to
incur expenses to protect his interests. The present action was
instituted because plaintiff demanded an exorbitant amount for
moral damages (P60,000) and naturally the defendant did not
and could not yield to such demand. This is neither a case that
comes under paragraph 11 of Article 2208 because the Lower
Court did not deem it just and equitable to award any amount
for attorney's fees. As We agree with the trial Judge on this point,
We cannot declare that he erred for not awarding to plaintiff any
such fees in this case.
Coming now to the appeal of the defendant, the Court, after due
consideration of the evidence appearing on record:
(1) Approves the award of P700 for medicine, doctors' fees and
transportation expenses;
(2) Reduces the award of P3,000 as attorney's fees to the sum of
P2,000, as Manolo Maddela, defendant in Criminal Case No. 364
of the Court of First Instance of Nueva Vizcaya testified that he
has already paid to plaintiff part of the latter's fees of P3,000,
the amount of which was not disclosed, though it was
incumbent upon the plaintiff to establish how much he had been
paid of said fees;
(3) Approves the award of P200 as unearned professional fees as
attorney for the defendant in Civil Case No. 238191 of the
Municipal Court of Manila whom plaintiff was unable to
represent, and for the latter's failure to take the deposition of
one Agripina Angrepan due to the automobile accident referred
to in this case.
Before closing this decision We deem it convenient to quote the
following passage of defendant's brief as appellant:
"Realizing its obligation under its contract of carriage with the
plaintiff, and because the facts of the case, as have been shown,
mark it as more proper for the Municipal Court only, the
defendant, to avoid the expense and time of litigation, offered to
settle the case amicably with plaintiff, but the latter refused and
insisted on his demand for P72,050.20 (Exhibit K) as the only
basis for settlement, thus adding a clearly petty case to the
already overflowing" desk of the Honorable Members of this
Court. We admire and respect at all times a man for standing up
and fighting for his rights, and when said right consists in
injuries sustained due to a breach of a contract of carriage with
us, sympathy and understanding are added thereto. But when
a person starts demanding P72,050.20 for a solitary bruise and
sprain, injuries for which the trial court, even at its generous
although erroneous best, could' only grant P5,900, then respect
and sympathy give way to something else. It is time to fight, for,
in our humble opinion, there is nothing more loathsome nor
truly worthy of condemnation than one who uses his injuries for
other purposes than just rectification. If plaintiff's claim is
granted, it would be a blessing, not a misfortune, to be injured."
(p. 34-35)
This case was instituted by a lawyer who, as an officer of the
courts, should be the first in helping Us in the administration of
justice, and after going over the record
of P72,0 50.20 for a subluxation of the right humerus bone and
an insignificant contusion in the chest, has not even the
semblance of reasonableness. As a matter of fact, Dr. Aguilar
himself said that the x-ray plates (Exhibits A, B and C) "did not
show anything significant except that it shows a slight
subluxation of the right shoulder, and that there is a suspicious
fracture", which ultimately he admitted not to exist. The plaintiff
himself must have felt embarrassed by his own attitude when
after receiving defendant's brief as appellant, he makes in his
brief as appellee the categorical statement that he "DOES NOT
NOW INSIST NOR PRETEND IN THE LEAST to col-lect from the
defendant all the damages he had claimed in his complaint, but
instead he is submitting his case to the sound discretion of the
Honorable Court for the award of a reasonable and equitable
damages allowable by law, to compensate the plaintiff of the
suffering and losses he had undergone and incurred because of
the accident oftentimes mentioned in this brief in which plaintiff
was injured" (p. 17-18). This acknowledgment comes too late, for
plaintiff has already deprived the Court of Appeals of the
occasion to exercise its appellate jurisdiction over this case
which he recklessly dumped to this Court. We certainly cannot
look with favor at this attitude of plaintiff.
Wherefore, the decision appealed from is hereby modified by
reducing the amount awarded as unearned professional fees
from P3,000 to P2,000 and by eliminating the moral
damages of P2,000 awarded by the Lower Court to the
plaintiff. Said decision is in all other respects affirmed,
without pronouncement as to -costs. It is so ordered.

Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo,

Labrador, Conception, Reyes, J. B. L., and Endencia, JJ.,
concur.
Judgment affirmed with modification. Cachero vs. Manila Yellow
Taxicab Co., Inc., 101 Phil. 523, No. L-8721 May 23, 1957
[No. L-12163. March 4, 1959]
PAZ FORES, petitioner, vs. IRENEO MIRANDA, respondent.
1.PUBLIC UTILITIES; SALE OF PUBLIC SERVICE VEHICLE;
APPROVAL OF PUBLIC SERVICE COMMISSION; REASON.—
Transfer of a public service vehicle, if made without the requisite
approval of the Public Service Commission, is not effective and
binding in so far as the responsibility of the grantee under the
franchise in relation ,to the public is concerned. The provisions
of Section 20 of the Public Service Act are clear and prohibit the
sale, alienation, lease, of an operator's property, franchises,
certificates, privileges or rights, or any part thereof without
approval or authorization of the Public Service Commission. The
law was designed primarily for the protection of the public
interest; and until the approval of the Public Service
Commission is obtained, the vehicle is in contemplation of law,
still under the service of the owner or operator standing in the
records of the Commission to which the public has a right to rely
upon.
2.STATUTORY CONSTRUCTION; PROVISION OF SECTION 20 (Z)
PUBLIC SERVICE ACT INTERPRETED.—The proviso contained in
Section 20 (Z) of the Public Service Act, to the effect that nothing
therein shall be construed "to prevent the transaction from being
negotiated or completed before its approval", means only that
the sale without the required approval is still valid and binding
between the parties. (Montoya vs. Ignacio 50 Off. Gaz., No. 1, p.
108). the phrase "in ordinary course of its business" found in
the other proviso "or to prevent the sale, alienation, or lease by
any public service of any of its property," could not have been
intended to include the sale of the vehicle itself but at most may
refer only to such property that can be conceivably disposed of
by the carrier in the ordinary course of its business, like junked
equipment or spare parts.
3.DAMAGES; ACTUAL DAMAGES; ATTORNEY'S FEES INCLUDED
IN THE CONCEPT; AWARD BY COURT OF APPEALS MOTU
PROPRIO.—Although the Court of First Instance did not provide
for attorney's fees in the sum of P3,000 and no appeal to the
'Court of Appeals was interposed on the point, it was not an error
for the Court of Appeals to award them motu propio because
attorney's fees are included in the concept of actual damages
under the Civil Code and may be awarded whenever the court
deems it just and equitable.
4.ID.; MORAL DAMAGES NOT RECOVERABLE IN ACTION ON
BREACH OF CONTRACT OF TRANSPORTATION.—Moral
damages are generally not recoverable in damage actions
predicated on a breach of contract of transportation in view of
the provisions of Articles 2218 and 2220 of the new Civil Code.
5.ID.; ID.; EXCEPTION IN CASE OF DEATH OF PASSENGER.—
The exception to the basic rule of damages is a mishap resulting
in the death of a passenger, in which case Article 1764 makes
the common carrier expressly subject to the rule of Art. 2206, of
the Civil Code that entitles the spouse, descendants and
ascendants of the deceased passenger to "demand moral
damages for mental anguish by reason of the death of the
deceased." (Necesito vs. Paras G. R. No. L-10605, Resolution on
motion to reconsider, Sept. 11, 1958).
6.ID.; ID.; IF NO DEATH; PROOF OF MALICE OR BAD FAITH
REQUIRED.—Where the injured passenger does not die, moral
damages are not recoverable unless it is proved that the carrier
was guilty of malice or bad faith. The mere carelessness of the
carrier's driver does not per se constitute or justify an inference
of malice or bad faith on the part of the carrier.
7.ID.; ID.; NEGLIGENCE; NOT CARRIER'S BAD FAITH.—While it
is true that negligence may be occasionally so gross as to
amount to malice, that fact must be shown in evidence. A
carrier's bad faith is not to be lightly inferred from a mere finding
that the contract was breached through negligence of the
carrier's employees.
8.ID.; ID.; FAILURE TO TRANSPORT PASSENGERS SAFELY.—The
theory that carrier's violation of its engagement to safely
transport the passenger involves a breach of the passenger's
confidence, and therefore should be regarded as a breach of
contract in bad faith, justifying recovery of moral damages,
under Article 2220 of the New Civil Code is untenable, for under
it the carrier would always be deemed in bad faith in every case
its obligation to the passenger is infringed and it would never be
accountable for simple negligence while under Article 1756 of
the Civil Code the presumption is that common carriers acted
negligently and not maliciously, and Article 1762 speaks of
negligence of the common carrier.
9.ID.; CARRIERS; ACTIONS FOR BREACH OF CONTRACT; WHEN
PRESUMPTION OF CARRIER'S LIABILITY ARISES.—An action for
breach of contract imposes on the carrier a presumption of
liability upon mere proof of injury of the passenger; the latter
does not have to establish the fault of the carrier, or of his
employees, and the burden is placed on the carrier to prove that
it was due to an unforeseen event or to force majeure (Congco
vs. Manila Railroad Co. 38 Phil., 768, 777.) Morever, the carrier,
unlike in suits for quasi-delict may not escape liability by
proving that it has exercised due diligence in the selection and
supervision of its employees. (Art. 1759 New Civil Code, Cangco
vs. Manila Railroad Co. Supra; Prado vs. Manila Electric Co., 51
Phil., 900)
PETITION for review by Certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Alberto O. Villaraza for petitioner.
Almazán & Ereñeta for respondent.
REYES, J. B. L., J.:
Defendant-petitioner Paz Fores brings this petition for review of
the decision of the Court of Appeals (C. A. Case No. 1437-R)
awarding to the plaintiff-respondent Ireneo Miranda the sums of
P5,000 by way of actual damages and counsel fees, and P10,000
as moral damages, with costs.
Respondent was one of the passengers on a jeepney driven by
Eugenio Luga. While the vehicle was descending the Sta. Mesa
bridge at an excessive rate of speed, the driver lost control
thereof, causing it to swerve and to hit the bridge wall. The
accident occurred on the morning of March 22, 1953. Five of the
passengers were injured, including the respondent who suffered
a fracture of the upper right humerus. He was taken to the
National Orthopedic Hospital for treatment, and later was
subjected to a series of operations; the first on May 23, 1953,
when wire loops were wound around the broken bones and
screwed into place; a second, effected to insert a metal splint,
and a third one to remove such splint. At the time of the trial, it
appears that respondent had not yet recovered the use of his
right arm.
The driver was charged with serious physical injuries through
reckless imprudence, and upon interposing a plea of guilty was
sentenced accordingly.
The contention that the evidence did not sufficiently establish
the identity of the vehicle as that belonging to the petitioner was
rejected by the appellate court which found, among other things,
that it carried plate No. TPU-1163, series of 1952, Quezon City,
registered in the name of Paz Fores, (appellant herein) and that
the vehicle even had the name of "Doña Paz" painted below its
windshield. No evidence to the contrary was introduced by the
petitioner, who relied on an attack upon the credibility of the
two policemen who went to the scene of the incident.
A point to be further remarked is petitioner's contention that on
March 21, 1953, or one day before the accident happened, she
allegedly sold the passenger jeep that was involved therein to a
certain Carmen Sackerman.
The initial problem raised by the petitioner in this appeal may
be formulated thus—"Is the approval of the Public Service
Commission necessary for the sale of a public service vehicle
even without conveying therewith the authority to operate the
same ?" Assuming the dubious sale to be a fact, the Court of
Appeals answered the query in the affirmative. The ruling should
be upheld. Section 20 of the Public Service Act (Commonwealth
Act No. 146) provides:
"SEC. 20. Subject to established limitations and exceptions and
saving provisions to the contrary, it shall be unlawful for any
public service or for the owner, lessee or operator thereof,
without the previous approval and authority of the Commission
previously had—
(g) To sell, alienate, mortgage, encumber or lease its property,
franchises, certificates, privileges, or rights, or any part thereof;
or merge or consolidate its property, franchises, privileges or
rights, or any part thereof, with those of any other public service.
The approval herein required shall be given, after notice to the
public and after hearing the persons interested at a public
hearing, if it be shown that there are just and reasonable
grounds for making the mortgage or encumbrance, for liabilities
of more than one year maturity, or the sale, alienation, lease,
merger, or consolidation to be approved and that the same are
not detrimental to the public interest, and in case of a sale, the
date on which the same is to be consummated shall be fixed in
the order of approval: Provided, however, That nothing herein
contained shall be construed to prevent the transaction from
being negotiated or completed before its approval or to prevent
the sale, alienation, or lease by any public service of any of its
property in the ordinary course of its business."
Interpreting the effects of this particular provision of law, we
have held in the recent cases of Montoya vs. Ignacio,* 50 Off.
Gaz. No. 1, p. 108; Timbol vs. Osias, et al., G. R. No. L-7547,
April 30, 1955, and Medina vs. Cresencia, 99 Phil., 506; 52 Off.
Gaz. No. 10, p. 4606, that a transfer contemplated by the law, if
made without the requisite approval of the Public Service
Commission, is not effective and binding in so far as the
responsibility of the grantee under the franchise in relation to
the public is concerned. Petitioner assails, however, the
applicability of these rulings to the instant case, contending that
in
those cases, the operator did not convey, by lease or by sale, the
vehicle independently of his rights under the franchise. This line
of reasoning does not find support in the law. The provisions of
the statute are clear and prohibit the sale, alienation, lease, or
encumbrance of the property, franchise, certificate, privileges or
rights, or any part thereof of the owner or operator of the public
service without approval or authorization of the Public Service
Commission. The law was designed primarily for the protection
of the public interest; and until the approval of the Public Service
Commission is obtained the vehicle is, in contemplation of law,
still under the service of the owner or operator standing in the
records of the Commission which the public has a right to rely
upon.
The proviso contained in the aforequoted law, to the effect that
nothing therein shall be construed "to prevent the transaction
from being negotiated or completed before its approval", means
only that the sale without the required approval is still valid and
binding between the parties (Montoya vs. Ignacio, supra). The
phrase "in the ordinary course of its business" found in the other
proviso "or to prevent the sale, alienation, or lease by any public
service of any of its property". as correctly observed by the lower
court, could not have been intended to include the sale of the
vehicle itself, but at most may refer only to such property that
may be conceivably disposed or by the carrier in the ordinary
course of its business, like junked equipment or spare parts.
The case of Indalecio de Torres vs. Vicente Ona (63 Phil., 594,
597) is enlightening; and there, it was held:
"Under the law, the Public Service Commission has not only
general supervision and regulation of, but also full jurisdiction
and control over all public utilities including the property,
equipment and facilities used, and the property rights and
franchises enjoyed by every individual and company engaged in
the performance of a public service in the sense this phrase is
used in the Public Service Act or Act No. 3108 (sec. 1308). By
virtue of the provisions
of said Act, motor vehicles used in the performance of a service,
as the transportation of freight from one point to another, have
to this date been considered—and they cannot but be so
consideredpublic service property; and, by reason of its own
nature, a TH truck, which means that the operator thereof
places it at the disposal of anybody who is willing to pay a rental
for its use, when he desires to transfer or carry his effects,
merchandise or any other cargo from one place to another, is
necessarily a public service property." (Emphasis supplied)
Of course, this Court has held in the case of Bachrach Motor Co.
vs. Zamboanga Transportation Co., 52 Phil., 244, that there may
be a nunc pro tunc authorization which has the effect of having
the approval retroact to the date of the transfer; but such
outcome cannot prejudice rights intervening in the meantime. It
appears that no such approval was given by the Commission
before the accident occurred.
The P10,000 actual damages awarded by the Court of First
Instance of Manila were reduced by the Court of Appeals to only
P2,000, on the ground that a review of the records failed to
disclose a sufficient basis for the trial court's appraisal, since
the only evidence presented on this point consisted of
respondent's bare statement that his expenses and loss of
income amounted to P20,000. On the other hand, "it cannot be
denied," the lower court said, "that appellee (respondent) did
incur expenses." It is well to note further that respondent was a
painter by profession and a professor of Fine Arts, so that the
amount of P2,000 awarded cannot be said to be excessive (see
Arts. 2224 and 2225, Civil Code of the Philippines). The
attorney's fees in the sum of P3,000 also awarded to the
respondent are assailed on the ground that the Court of First
Instance did not provide for the same, and since no appeal was
interposed by said respondent, it was allegedly error for the
Court of Appeals to award them motu proprio. Petitioner fails to
note that attorney's fees are included in the concept of actual
damages under the Civil Code and may be awarded whenever
the court deems it just and equitable (Art. 2208, Civil Code of
the Philippines). We see no reason to alter these awards.
Anent the moral damages ordered to be paid to the respondent,
the same must be discarded. We have repeatedly ruled (Cachero
vs. Manila Yellow Taxicab Co. Inc., 101 Phil., 523; 54 Off. Gaz.,
[26], 6599; Necesito, et al vs. Parás, 104 Phil., 75; 56 Off. Gaz.,
[23] 4023, that moral damages are not recoverable in damage
actions predicated on a breach of the contract of transportation,
in view of Articles 2219 and 2220 of the new Civil Code, which
provide as follows:
"ART. 2219. Moral damages may be recovered in the following
and analogous cases:
(1) A criminal offense resulting in physical injuries;
(2) Quasi-delicts causing physical injuries;
ART. 2220. Willful injury to property may be a legal ground for
awarding moral damages if the court should find that, under the
circumstances, such damages are justly due. The same rule
applies to breaches of contract where the def endant acted f
raudulently or in bad faith."
By contrasting the provisions of these two articles it immediately
becomes apparent that:
(a) In case of breach of contract (including one of transportation)
proof of bad faith or fraud (dolus), i.e., wanton or deliberately
injurious conduct, is essential to justify an award of moral
damages; and
(b) That a breach of contract can not be considered included in
the descriptive term "analogous cases" used in Art. 2219; not
only because Art. 2220 specifically provides for the damages
that are caused by contractual breach, but because the
definition of quasi-delict in Art. 2176 of the Code expressly
excludes the cases where there is a "preexisting contractual
relation between the parties."
"ART. 2176. Whoever by act or omission causes damage to
another, there being f ault or negligence, is obliged to pay for the
damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter."
The exception to the basic rule of damages now under
consideration is -a mishap resulting in the death of a passenger,
in which case Article 1764 makes the common carrier expressly
subject to the rule of Art. 2206, that entitles the spouse,
descendants and ascendants of the deceased passenger to
"demand moral damages for mental anguish by reason of the
death of the deceased" (Necesito vs. Parás, 104 Phil., 84,
Resolution on motion to reconsider, September 11, 1958). But
the exceptional rule of Art. 1764 makes it all the more evident
that where the injured passenger does not die, moral damages
are not recoverable unless it is proved that the carrier was guilty
of malice or bad faith. We think it is clear that the mere
carelessness of the carrier's driver does not per se constitute or
justify an inference of malice or bad faith on the part of the
carrier; and in the case at bar there is no other evidence of such
malice to support the award of moral damages by the Court of
Appeals. To award moral damages for breach of contract,
therefore, without proof of bad faith or malice on the part of the
defendant, as required by Art. 2220, would be to violate the clear
provisions of the law, and constitute unwarranted judicial
legislation.
The Court of Appeals has invoked our rulings in Castro vs. Acro
Taxicab Co., R. G. No. 49155, December 14, 1948 and Layda vs.
Court of Appeals, 90 Phil., 724; but these doctrines were
predicated upon our former law of damages, before judicial
discretion in fixing them became limited by the express
provisions of the new Civil Code (previously quoted). Hence, the
aforesaid rulings are now inapplicable.
Upon the other hand, the advantageous position of a party suing
a carrier for breach of the contract of transportation explains, to
some extent, the limitations imposed by the new Code on the
amount of the recovery. The action for breach of contract
imposes on the defendant carrier a presumption of liability upon
mere proof of injury to the passenger; that latter is relieved from
the duty to establish the fault of the carrier, or of his employees,
and the burden is placed on the carrier to prove that it was due
to an unforseen event or to force majeure (Cangco vs. Manila
Railroad Co., 38 Phil., 768, 777). Moreover, the carrier, unlike
in suits for quasi-delict, may not escape liability by proving that
it has exercised due diligence in the selection and supervision of
its employees (Art, 1759, new Civil Code; Cangco vs. Manila
Railroad Co., supra; Prado vs. Manila Electric Co., 51 Phil., 900).
The difference in conditions, defenses and proof, as well as the
codal concept of quasi-delict .as essentially extra contractual
negligence, compel us to differentiate between action ex
contractu, and actions quasi ex delicto, and prevent us from
viewing the action for breach of contract as simultaneously
embodying an action on tort. Neither can this action be taken as
one to enforce on employee's liability under Art. 103 of the
Revised Penal Code, since the responsibility is not alleged to be
subsidiary, nor is there on record any averment or proof that the
driver of appellant was insolvent. In fact, he is not even made a
party to the suit.
It is also suggested that a carrier's violation of its engagement to
safely transport the passenger involves a breach of the
passenger's confidence, and therefore should be regarded as a
breach of contract in bad faith, justifying recovery of moral
damages under Art. 2220. This theory is untenable, for under it
the carrier would always be deemed in bad faith, in every case
its obligation to the passenger is infringed, and it would be never
accountable for simple negligence; while under the law (Art.
1756). the presumption is that common carriers acted
negligently (and not maliciously), and Art. 1762 speaks of
negligence of the common carrier.
"ART. 1756. In case of death of or injuries to passengers,
common carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in articles 1733 and 1755."
"ART. 1762. The contributory negligence of the passenger does
not bar recovery of damages for his death or injuries, if the
proximate cause thereof is the negligence of the common carrier,
but the amount of damages shall be equitably reduced."

The distinction between fraud, bad faith or malice in the sense

of deliberate or wanton wrong doing and negligence (as mere
carelessness) is too fundamental in our law to be ignored (Arts.
1170-1172); their consequences being clearly differentiated by
the Code.
"ART. 2201. In contracts and quasi-contracts, the damages for
which the obligor who acted in good faith is liable shall be those
that are the natural and probable consequences of the breach of
the obligation, and which the parties have foreseen or could have
reasonably foreseen at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the
obligorshall be responsible for all damages which may be
reasonably attributed to the non-performance of the obligation."
It is to be presumed, in the absence of statutory provision to the
contrary, that this difference was in the mind .of the lawmakers
when in Art. 2220 they limited recovery of moral damages to
breaches of contract in bad faith. It is true that negligence may
be occasionally so gross as to amount to malice; but that fact
must be shown in evidence, and a carrier's bad faith is not to be
lightly inferred f rom a mere finding that the contract was
breached through negligence of the carrier's employees.
In view of the foregoing considerations, the decision of the Court
of Appeals is modified by eliminating the award of P5.000.00 by
way of moral damages (Court of Appeals Resolution of May 5,
1957). In all other respects, the judgment is affirmed. No costs
in this instance. So ordered.
Parás, C. J., Bengzon, Padilla, Montemayor, Reyes, A. Bautista
Angelo, Labrador, Concepción, and Endencia, JJ., concur.
Decision affirmed with modification.
Fores vs. Miranda, 105 Phil. 266, No. L-12163 March 4, 1959
Tan vs. Northwest Airlines, Inc.
G.R. No. 135802. March 3, 2000.*
PRISCILLA L. TAN, petitioner, vs. NORTHWEST AIRLINES,
INC., respondent.
Common Carriers; Air Transportation; Damages; Willful
Misconduct; For willful misconduct to exist, there must be a
showing that the acts complained of were impelled by an intention
to violate the law, or were in persistent disregard of one’s rights.—
We agree with the Court of Appeals that respondent was not
guilty of willful misconduct. “For willful misconduct to exist,
there must be a showing that the acts complained of were
impelled by an intention to violate the law, or were in persistent
disregard of one’s rights. It must be evidenced by a flagrantly or
shamefully wrong or improper conduct.”
Same; Same; Same; Bad Faith; No malice or bad faith may be
imputed to an airline where, due to weight and balance
restrictions, its act of transporting a passenger’s baggage on
another plane was done as a safety measure.—Contrary to
petitioner’s contention, there was nothing in the conduct of
respondent which showed that they were motivated by malice or
bad faith in loading her baggages on another plane. Due to
weight and balance restrictions, as a safety measure,
respondent airline had to transport the baggages on a different
flight, but with the same expected date and time of arrival in the
Philippines.
Same; Same; Same; Same; Where in breaching the contract of
carriage the airline is not shown to have acted fraudulently or in
bad faith, liability for damages is limited to the natural and
probable consequences of the breach of obligation which the
parties had foreseen or could have reasonably foreseen.—“Bad
faith does not simply connote bad judgment or negligence, it
imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, a breach of known duty through
some motive or interest or ill-will that partakes of the nature of
fraud.” “Where in breaching the contract of carriage the
defendant airline is not shown to have acted fraudulently or in
bad faith, liability for damages is limited to the natural and
probable consequences of the breach of obligation which the
parties had foreseen or could have reasonably foreseen. In that
case, such liability does not include moral and exemplary
damages.”
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
Marita V. Padolina for petitioner.
Quisumbing, Torres for respondent.
PARDO, J.:
Petitioner Priscilla L. Tan appeals via certiorari from the decision
of the Court of Appeals1 affirming with modification2 the
decision of the trial court,3 ordering respondent to pay petitioner
the following amounts: (1) P15,000.00, as actual damages; (2)
P100,000.00, as moral damages; (3) P50,000.00, as exemplary
damages; (4) P30,000.00, as and for attorney’s fees; and (5)
costs.
1 In CA-G.R. CV No. 54438, decision promulgated on September
30, 1998, Justice Martin, Jr., ponente, and Justices Callejo, Sr.
and Umali, concurring.
2 The Court of Appeals deleted the award of moral and
exemplary damages and reduced the attorney’s fees to
P10,000.00.
3 In Civil Case No. 94-2042, Regional Trial Court, Branch 150,
Makati City, Judge Erna Falloran Aliposa, presiding.
The case before the Court traces its roots from an action for
damages for breach of contract of air carriage for failure to
deliver petitioner’s baggages on the date of her arrival filed on
June 29, 1994 with the Regional Trial Court, Makati, Branch
150 against respondent Northwest Airlines, Inc., a foreign
corporation engaged in the business of air transportation.
 After due trial, on June 10, 1996, the trial court rendered
decision finding respondent Northwest Airlines, Inc. liable for
The antecedent facts are as follows:
damages, as follows:
On May 31, 1994, Priscilla L. Tan and Connie Tan boarded
“WHEREFORE, judgment is hereby rendered ordering the
Northwest Airlines Flight 29 in Chicago, U.S.A. bound for the
defendant to pay the plaintiff the following amounts:
Philippines, with a stop-over at Detroit, U.S.A. They arrived at
the Ninoy Aquino International Airport (NAIA) on June 1, 1994 “1. P15,000.00, as actual damages;
at about 10:40 in the evening.
“2. P100,000.00, as moral damages;
Upon their arrival, petitioner and her companion Connie Tan
“3. P50,000.00, as exemplary damages;
found that their baggages were missing. They returned to the
airport in the evening of the following day and they were “4. P30,000.00, as and for attorney’s fees and
informed that their baggages might still be in another plane in
Tokyo, Japan. “5. Costs.

On June 3, 1994, they recovered their baggages and discovered “SO ORDERED.
that some of its contents were destroyed and soiled. “Given this 10th day of June, 1996 at Makati City.
Claiming that they “suffered mental anguish, sleepless nights “ERNA FALLORAN ALIPOSA
and great damage” because of Northwest’s failure to inform them
in advance that their baggages would not be loaded on the same “Judge”
flight they boarded and because of their delayed arrival, they
Respondent Northwest Airlines, Inc. appealed from the trial
demanded from Northwest Airlines compensation for the
court’s decision to the Court of Appeals contending that the
damages they suffered. On June 15, 1994 and June 22, 1994,
court a quo erred in finding it guilty of breach of contract of
petitioner sent demand letters to Northwest Airlines, but the
carriage and of willful misconduct and awarded damages which
latter did not respond. Hence, the filing of the case with the
had no basis in fact or were otherwise excessive.
regional trial court.
On September 30, 1998, the Court of Appeals promulgated its
In its answer to the complaint, respondent Northwest Airlines
decision partially granting the appeal by deleting the award of
did not deny that the baggages of petitioners were not loaded on
moral and exemplary damages and reducing the attorney’s fees,
Northwest Flight 29. Petitioner’s baggages could not be carried
specifically providing that:
on the same flight because of “weight and balance restrictions.”
However, the baggages were loaded in another Northwest “WHEREFORE, PREMISES CONSIDERED, the appeal is hereby
Airlines flight, which arrived in the evening of June 2, 1994. GRANTED partially. The Decision of the lower court dated June
10, 1996 is AFFIRMED with the modification that the award of
When petitioner received her baggages in damaged condition,
moral and exemplary damages is deleted and the amount of
Northwest offered to either (1) reimburse the cost or repair of the
attorney’s fees is reduced to ten thousand pesos (P10,000.00).
bags; or (2) reimburse the cost for the purchase of new bags,
upon submission of receipts. “No pronouncement as to costs.
“SO ORDERED.”
The issue is whether respondent is liable for moral and
exemplary damages for willful misconduct and breach of the
contract of air carriage.
The petition is without merit.
We agree with the Court of Appeals that respondent was not
guilty of willful misconduct. “For willful misconduct to exist,
there must be a showing that the acts complained of were
impelled by an intention to violate the law, or were in persistent
disregard of one’s rights. It must be evidenced by a flagrantly or
shamefully wrong or improper conduct.”
Contrary to petitioner’s contention, there was nothing in the
conduct of respondent which showed that they were motivated
by malice or bad faith in loading her baggages on another plane.
Due to weight and balance restrictions, as a safety measure,
respondent airline had to transport the baggages on a different
flight, but with the same expected date and time of arrival in the
Philippines. As aptly explained by respondent:
“To ensure the safety of each flight, Northwest’s personnel
determine every flight’s compliance with “weight and balance
restrictions.” They check the factors like weight of the aircraft
used for the flight gas input, passenger and crew load, baggage
weight, all in relation to the wind factor anticipated on the flight.
If there is an overload, i.e., a perceived safety risk, the aircraft’s
load will be reduced by off-loading cargo, which will then be
placed on the next available flight.”
It is admitted that respondent failed to deliver petitioner’s
luggages on time. However, there was no showing of malice in
such failure. By its concern for safety, respondent had to ship
the baggages in another flight with same date of arrival.
Hence, the Court of Appeals correctly held that respondent did
not act in bad faith.9
“Bad faith does not simply connote bad judgment or negligence,
it imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, a breach of known duty through
some motive or interest or ill-will that partakes of the nature of
fraud.”
“Where in breaching the contract of carriage the defendant
airline is not shown to have acted fraudulently or in bad faith,
liability for damages is limited to the natural and probable
consequences of the breach of obligation which the parties had
foreseen or could have reasonably foreseen. In that case, such
liability does not include moral and exemplary damages.”11
Consequently, we have no reason to reverse the decision of the
Court of Appeals.
WHEREFORE, the Court DENIES the petition for lack of
merit. The Court AFFIRMS the decision of the Court of
Appeals deleting, however, the award of attorney’s fees.
No costs.
SO ORDERED.
Davide, Jr. (C.J., Chairman), Puno, Kapunan and Ynares-
Santiago, JJ., concur.
Petition denied, judgment affirmed.
Notes.—In determining the amount of compensatory damages in
breach of contract involving misplaced luggage, it is vital that the
claimant satisfactorily prove during the trial the existence of the
factual basis of the damages and its causal connection to defendant’s
acts. (British Airways vs. Court of Appeals, 285 SCRA 450 [1998])
In awarding moral damages for breach of contract of carriage, the
breach must be wanton and deliberately injurious or the one
responsible acted fraudulently or with malice or bad faith. (Cervantes
vs. Court of Appeals, 304 SCRA 25 [1999])
Tan vs. Northwest Airlines, Inc., 327 SCRA 263, G.R. No. 135802
March 3, 2000
Alitalia vs. Intermediate Appellate Court
G.R. No. 71929. December 4, 1990.*
ALITALIA, petitioner, vs. INTERMEDIATE APPELLATE
COURT and FELIPA E. PABLO, respondents.
Transportation; Common Carriers; The Warsaw Convention does
not operate as an absolute limit of the extent of an airline's
liability; it does not regulate or exclude liability for other breaches
of contract by the carrier, or misconduct of its employees, or for
some particular or exceptional type of damage.—The Convention
does not thus operate as an exclusive enumeration of the
instances of an airline's liability, or as an absolute limit of the
extent of that liability. Such a proposition is not borne out by
the language of the Convention, as this Court has now, and at
an earlier time, pointed out. Moreover, slight reflection readily
leads to the conclusion that it should be deemed a limit of
liability only in those cases where the cause of the death or
injury to person, or destruction, loss or damage to property or
delay in its transport is not attributable to or attended by any
wilful misconduct, bad faith, recklessness, or otherwise
improper conduct on the part of any official or employee for
which the carrier is responsible, and there is otherwise no
special or extraordinary form of resulting injury. The
Convention's provisions, in short, do not "regulate or exclude
liability for other breaches of contract by the carrier" or
misconduct of its officers and employees, or for some particular
or exceptional type of damage. Otherwise, "an air carrier would
be exempt from any liability for damages in the event of its
absolute refusal, in bad faith, to comply with a contract of
carriage, which is absurd." Nor may it for a moment be supposed
that if a member of the aircraft complement should inflict some
physical injury on a passenger, or maliciously destroy or damage
the latter's property, the Convention might successfully be
pleaded as the sole gauge to determine the carrier's liability to
the passenger. Neither may the Convention be invoked to justify
the disregard of some extraordinary sort of damage resulting to
a passenger and preclude recovery therefor beyond the limits set
by said Convention. It is in this sense that the Convention has
been applied, or ignored, depending on the peculiar facts
presented by each case.
Same; Same; Same; Damages; Nominal Damages; Private
respondent is entitled to an award of nominal damages for the
injury she suffered as a result of the carrier's failure to deliver her
luggage on time.—In the case at bar, no bad faith or otherwise
improper conduct may be ascribed to the employees of petitioner
airline; and Dr. Pablo's luggage was eventually returned to her,
belatedly, it is true, but without appreciable damage. The fact
is, nevertheless, that some special species of injury was caused
to Dr. Pablo because petitioner ALITALIA misplaced her baggage
and failed to deliver it to her at the time appointed—a breach of
its contract of carriage, to be sure—with the result that she was
unable to read the paper and make the scientific presentation
(consisting of slides, autoradiograms or films, tables and
tabulations) that she had painstakingly labored over, at the
prestigious international conference, to attend which she had
traveled hundreds of miles, to her chagrin and embarrassment
and the disappointment and annoyance of the organizers. She
felt, not unreasonably, that the invitation for her to participate
at the conference, extended by the Joint FAO/IAEA Division of
Atomic Energy in Food and Agriculture of the United Nations,
was a singular honor not only to herself, but to the University of
the Philippines and the country as well, an opportunity to make
some sort of impression among her colleagues in that field of
scientific activity. The opportunity to claim this honor or
distinction was irretrievably lost to her because of Alitalia's
breach of its contract. Apart from this, there can be no doubt
that Dr. Pablo underwent profound distress and anxiety, which
gradually turned to panic and finally despair, from the time she
learned that her suitcases were missing up to the time when,
having gone to Rome, she finally realized that she would no
longer be able to take part in the conference. As she herself put
it, she "was really shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo
cannot under the circumstances be restricted to that prescribed
by the Warsaw Convention for delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or
damage to her luggage. As already mentioned, her baggage was
ultimately delivered to her in Manila, tardily but safely.
She is however entitled to nominal damages—which, as the law
says, is adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be
vindicated and recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered—and this Court
agrees that the respondent Court of Appeals correctly set the
amount thereof at P40,000.00.
Same; Same; Same; Same; Same; A prayer "for such other and
further just and equitable relief in the premises" is broad enough
to comprehend an application as well for nominal damages.—As
to the purely technical argument that the award to her of such
nominal damages is precluded by her omission to include a
specific claim therefor in her complaint, it suffices to draw
attention to her general prayer, following her plea for moral and
exemplary damages and attorney's fees, "for such other and
further just and equitable relief in the premises," which certainly
is broad enough to comprehend an application as well for
nominal damages. Besides, petitioner should have realized that
the explicit assertion, and proof, that Dr. Pablo's right had been
violated or invaded by it—absent any claim for actual or
compensatory damages, the prayer thereof having been
voluntarily deleted by Dr. Pablo upon the return to her of her
baggage—necessarily raised the issue of nominal damages.
Attorney's Fees; Attorney's fees may be awarded when
defendant's acts or omission has compelled plaintiff to litigate or
incur expenses to protect her interests.—This Court also agrees
that respondent Court of Appeals correctly awarded attorney's
fees to Dr. Pablo, and the amount "of P5,000.00 set by it is
reasonable in the premises. The law authorizes recovery of
attorney's fees inter alia where, as here, "the defendant's act or
omission has compelled the plaintiff to litigate with third
persons or to incur expenses to protect his interest," or "where
the court deems it just and equitable."
PETITION for certiorari to review the decision of the then
Intermediate Appellate Court.
The facts are stated in the opinion of the Court.
Santiago & Santiago for petitioner.
Alfredo L. Bentulan for private respondent.
NARVASA, J.:
Dr. Felipa Pablo—an associate professor in the University of the
Philippines,1 and a research grantee of the Philippine Atomic
Energy Agency—was invited to take part at a meeting of the
Department of Research and Isotopes of the Joint FAO-IAEA
Division of Atomic Energy in Food and Agriculture of the United
Nations in Ispra, Italy.2 She was invited in view of her
specialized knowledge in "foreign substances in food and the
agriculture environment." She accepted the invitation, and was
then scheduled by the organizers, to read a paper on "The Fate
of Radioactive Fusion Products Contaminating Vegetable
Crops."3 The program announced that she would be the second
speaker on the first day of the meeting.4 To fulfill this
engagement, Dr. Pablo booked passage on petitioner airline,
ALITALIA.
She arrived in Milan on the day before the meeting in accordance
with the itinerary and time table set for her by ALITALIA. She
was however told by the ALITALIA personnel there at Milan that
her luggage was "delayed inasmuch as the same x x (was) in one
of the succeeding flights from Rome to Milan."5 Her luggage
consisted of two (2) suitcases: one contained her clothing and
other personal items; the other, her scientific papers, slides and
other research material. But the other flights arriving from Rome
did not have her baggage on board
By then feeling desperate, she went to Rome to try to locate her
bags herself. There, she inquired about her suitcases in the "
domestic and international airports, and filled out the forms
prescribed by ALITALIA for people in her predicament. However,
her baggage could not be found. Completely distraught and
discouraged, she returned to Manila without attending the the plaintiff s frustration and disappointment in not being able
meeting in Ispra, Italy. to appear at said conference; and for the embarrassment and
humiliation she suffered from the academic community for
Once back in Manila she demanded that ALITALIA make
failure to carry out an official mission for which she was singled
reparation for the damages thus suffered by her. ALITALIA
out by the faculty to represent her institution and the country.
offered her "free airline tickets to compensate her for any alleged
After weighing carefully all the considerations, the amount
damages x x." She rejected the offer, and forthwith commenced
awarded to the plaintiff for nominal damages and attorney's fees
the action6 which has given rise to the present appellate
should be increased to the cost of her round trip air fare or at
proceedings.
the present rate of peso to the dollar at P40,000,00."
As it turned out, Prof. Pablo's suitcases were in fact located and
ALITALIA has appealed to this Court on certiorari. Here, it seeks
forwarded to Ispra,7 Italy, but only on the day after her
to make basically the same points it tried to make before the
scheduled appearance and participation at the U.N. meeting
Trial Court and the Intermediate Appellate Court, i.e.:
there.8 Of course Dr. Pablo was no longer there to accept
delivery; she was already on her way home to Manila. And for 1) that the Warsaw Convention should have been applied to limit
some reason or other, the suitcases were not actually restored ALITALIA'S liability; and
to Prof. Pablo by ALITALIA until eleven (11) months later, and
2) that there is no warrant in fact or in law for the award to Dr.
four (4) months after institution of her action.
Pablo of nominal damages and attorney's fees.14
After appropriate proceedings and trial, the Court of First
In addition, ALITALIA postulates that it was error for the
Instance rendered judgment in Dr. Pablo's favor:
Intermediate Appellate Court to have refused to pass on all the
'(1) Ordering the defendant (ALITALIA) to pay x x (her) the sum assigned errors and in not stating the facts and the law on which
of TWENTY THOUSAND PESOS (P20,000.00), Philippine its decision is based.15
Currency, by way of nominal damages;
Under the Warsaw Convention,16 an air carrier is made liable
(2) Ordering the defendant to pay x x (her) the sum of FIVE
for damages for:
THOUSAND PESOS (P5,000.00), Philippine Currency, as and for
attorney's fees; (and) 1) the death, wounding or other bodily injury of a passenger if
the accident causing it took place on board the aircraft or in the
(3) Ordering the defendant to pay the costs of the suit."
course of its operations of embarking or disembarking;17
ALITALIA appealed to the Intermediate Appellate Court but
2) the destruction or loss of, or damage to, any registered
failed to obtain a reversal of the judgment.11 Indeed, the
luggage or goods, if the occurrence causing it took place during
Appellate Court not only affirmed the Trial Court's decision but
the carriage by air;"18 and
also increased the award of nominal damages payable by
ALITALIA to P40,000.00.12 That increase it justified as follows: 3) delay in the transportation by air of passengers, luggage or
goods.19
"Considering the circumstances, as found by the Trial Court and
the negligence committed by defendant, the amount of In these cases, it is provided in the Convention that the "action
P20,000.00 under present inflationary conditions as awarded x for damages, however founded, can only be brought subject to
x to the plaintiff as nominal damages, is too little to make up for the conditions and limits set out" therein.20

The Convention also purports to limit the liability of the carriers
in the following manner:
1. In the carriage of passengers the liability of the carrier for
each passenger is limited to the sum of 250,000 francs. x x x
Nevertheless, by special contract, the carrier and the passenger
may agree to a higher limit of liability.
2. a) In the carriage of registered baggage and of cargo, the
liability of the carrier is limited to a sum of 250 francs per
kilogramme, unless the passenger or consignor has made, at the
time when the package was handed over to the carrier, a special
declaration of interest in delivery at destination and has paid a
supplementary sum if the case so requires. In that case the
carrier will be liable to pay a sum not exceeding the declared
sum, unless he proves that that sum is greater than the actual
value to the consignor at delivery.
b) In the case of loss, damage or delay of part of registered
baggage or cargo, or of any object contained therein, the weight
to be taken into consideration in determining the amount to
which the carrier's liability is limited shall be only the total
weight of the package or packages concerned. Nevertheless,
when the loss, damage or delay of a part of the registered
baggage or cargo, or of an object contained therein, affects the
value of other packages covered by the same baggage check or
the same air way bill, the total weight of such package or
packages shall also be taken into consideration in determining
the limit of liability.
3. As regards objects of which the passenger takes charge
himself the liability of the carrier is limited to 5000 francs per
passenger.
4. The limits prescribed x x shall not prevent the court from
awarding, in accordance with its own law, in addition, the whole
or part of the court costs and of the other expenses of litigation
incurred by the plaintiff. The foregoing provision shall not apply
if the amount of the damages awarded, excluding court costs
and other expenses of the litigation, does not exceed the sum
which the carrier has offered in writing to the plaintiff within a
period of six months from the date of the occurrence causing the
damage, or before the commencement of the action, if that is
later.
The Warsaw Convention however denies to the carrier availment
"of the provisions which exclude or limit.his.liability, if the
damage is caused by his wilful misconduct or by such default
on his part as, in accordance with the law of the court seized of
the case, is considered to be equivalent to wilful misconduct," or
"if the damage is (similarly) caused x x by any agent of the carrier
acting within the scope of his employment."22 The Hague
Protocol amended the Warsaw Convention by removing the
provision that if the airline took all necessary steps to avoid the
damage, it could exculpate itself completely,23 and declaring the
stated limits of liability not applicable "if it is proved that the
damage resulted from an act or omission of the carrier, its
servants or agents, done with intent to cause damage or
recklessly and with knowledge that damage would probably
result." The same deletion was effected by the Montreal
Agreement of 1966, with the result that a passenger could
recover unlimited damages upon proof of wilful misconduct.
The Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or as an
absolute limit of the extent of that liability. Such a proposition
is not borne out by the language of the Convention, as this Court
has now, and at an earlier time, pointed out.25 Moreover, slight
reflection readily leads to the conclusion that it should be
deemed a limit of liability only in those cases where the cause of
the death or injury to person, or destruction, loss or damage to
property or delay in its transport is not attributable to or
attended by any wilful misconduct, bad faith, recklessness, or
otherwise improper conduct on the part of any official or
employee for which the carrier is responsible, and there is
otherwise no special or extraordinary form of resulting injury.
The Convention's provisions, in short, do not "regulate or
exclude liability for other breaches of contract by the carrier"26
or misconduct of its officers and employees, or for some
particular or exceptional type of damage. Otherwise, "an air
carrier would be exempt from any liability for damages in the
event of its absolute refusal, in bad faith, to comply with a
contract of carriage, which is absurd."27 Nor may it for a
moment be supposed that if a member of the aircraft
complement should inflict some physical injury on a passenger,
or maliciously destroy or damage the latter's property, the
Convention might successfully be pleaded as the sole gauge to
determine the carrier's liability to the passenger. Neither may
the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and
preclude recovery therefor beyond the limits set by said
Convention. It is in this sense that the Convention has been
applied, or ignored, depending on the peculiar facts presented
by each case.
In Pan American World Airways, Inc. v. I.A.C.,28 for example,
the Warsaw Convention was applied as regards the limitation on
the carrier's liability, there being a simple loss of baggage
without any otherwise improper conduct on the part of the
officials or employees of the airline or other special injury
sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been
held inapplicable, or as not restrictive of the carrier's liability,
where there was satisfactory evidence of malice or bad faith
attributable to its officers and employees.29 Thus, an air carrier
was sentenced to pay not only compensatory but also moral and
exemplary damages, and attorney's fees, for instance, where its
employees rudely put a passenger holding a first-class ticket in
the tourist or economy section,30 or ousted a brown Asiatic from
the plane to give his seat to a white man, or gave the seat of a
passenger with a confirmed reservation to another,32 or
subjected a passenger to extremely rude, even barbaric
treatment, as by calling him a "monkey."33
In the case at bar, no bad faith or otherwise improper conduct
may be ascribed to the employees of petitioner airline; and Dr.
Pablo's luggage was eventually returned to her, belatedly, it is
true, but without appreciable damage. The fact is, nevertheless,
that some special species of injury was caused to Dr. Pablo
because petitioner ALITALIA misplaced her baggage and failed
to deliver it to her at the time appointed—a breach of its contract
of carriage, to be sure—with the result that she was unable to
read the paper and make the scientific presentation (consisting
of slides, autoradiograms or films, tables and tabulations) that
she had painstakingly labored over, at the prestigious
international conference, to attend which she had traveled
hundreds of miles, to her chagrin and embarrassment and the
disappointment and annoyance of the organizers. She felt, not
unreasonably, that the invitation for her to participate at the
conference, extended by the Joint FAO/IAEA Division of Atomic
Energy in Food and Agriculture of the United Nations, was a
singular honor not only to herself, but to the University of the
Philippines and the country as well, an opportunity to make
some sort of impression among her colleagues in that field of
scientific activity. The opportunity to claim this honor or
distinction was irretrievably lost to her because of Alitalia's
breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent
profound distress and anxiety, which gradually turned to panic
and finally despair, from the time she learned that her suitcases
were missing up to the time when, having gone to Rome, she
finally realized that she would no longer be able to take part in
the conference. As she herself put it, she "was really shocked
and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo
cannot under the circumstances be restricted to that prescribed
by the Warsaw Convention for delay in the transportof baggage.
She is not, of course, entitled to be compensated for loss or
damage to her luggage. As already mentioned, her baggage was
ultimately delivered to her in Manila, tardily but safely. She is
however entitled to nominal damages—which, as the law says,
is adjudicated in order that a right of the plaintiff, which has
been violated or invaded by the defendant, may be vindicated
and recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered—and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at
P40,000.00. As to the purely technical argument that the award
to her of such nominal damages is precluded by her omission to
include a specific claim therefor in her complaint, it suffices to
draw attention to her general prayer, following her plea for moral
and exemplary damages and attorney's fees, "for such other and
further just and equitable relief in the premises," which certainly
is broad enough to comprehend an application as well for
nominal damages. Besides, petitioner should have realized that
the explicit assertion, and proof, that Dr. Pablo's right had been
violated or invaded by it—absent any claim for actual or
compensatory damages, the prayer thereof having been
voluntarily deleted by Dr. Pablo upon the return to her of her
baggage—necessarily raised the issue of nominal damages.

This Court also agrees that respondent Court of Appeals cor-

rectly awarded attorney's fees to Dr. Pablo, and the amount of
P5,000.00 set by it is reasonable in the premises. The law
authorizes recovery of attorney's fees inter alia where, as here,
"the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his
interest,"34 or "where the court deems it just and equitable."35
WHEREFORE, no error being perceived in the challenged
decision of the Court of Appeals, it appearing on the
contrary to be entirely in accord with the facts and the law,
said decision is hereby AFFIRMED, with costs against the
petitioner.
SO ORDERED.
Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.
Decision affirmed.
Note.—Common carrier has legal liability under the contract of
carriage. (Juntilla vs. Fontanar, 136 SCRA 624.)
Saludo, Jr. vs. Court of Appeals
G.R. No. 95536. March 23, 1992.*
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO,
LEOPOLDO G. SALUDO and SATURNINO G. SALUDO,
petitioners, vs. HON. COURT OF APPEALS, TRANS WORLD
AIRLINES, INC., and PHILIPPINE AIRLINES, INC.,
respondents.
Remedial Law; Appeals; Petition for review on certiorari;
Exceptions to rule on conclusiveness of Court of Appeals findings
of fact.—At the outset and in view of the spirited exchanges of
the parties on this aspect, it is to be stressed that only questions
of law may be raised in a petition filed in this Court to review on
certiorari the decision of the Court of Appeals. This being so, the
factual findings of the Court of Appeals are final and conclusive
and cannot be reviewed by the Supreme Court. The rule,
however, admits of established exceptions, to wit: (a) where there
is grave abuse of discretion; (b) when the finding is grounded
entirely on speculations, surmises or conjectures; (c) when the
inference made is manifestly mistaken, absurd or impossible; (d)
when the judgment of the Court of Appeals was based on a
misapprehension of facts; (e) when the factual findings are
conflicting; (f) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same are contrary to
the admissions of both appellant and appellee; (g) when the
Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly considered, would
justify a different conclusion; and (h) where the findings of fact
of the Court of Appeals are contrary to those of the trial court,
or are mere conclusions without citation of specific evidence, or
where the facts set forth by the petitioner are not disputed by
the respondent, or where the findings of fact of the Court of
Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.
Transportation Law; Common Carriers; Bill of Lading.—A bill of
lading is a written acknowledgment of the receipt of the goods
and an agreement to transport and deliver them at a specified
place to a person named or on his order. Such instrument may
be called a shipping receipt, forwarder’s receipt and receipt for
transportation. The designation, however, is immaterial. It has
been held that freight tickets for bus companies as well as
receipts for cargo transported by all forms of transportation,
whether by sea or land, fall within the definition. Under the
Tariff and Customs Code, a bill of lading includes airway bills of
lading. The two-fold character of a bill of lading is all too familiar;
it is a receipt as to the quantity and description of the goods
shipped and a contract to transport the goods to the consignee
or other person therein designated, on the terms specified in
such instrument.
Same; Same; Same; A bill of lading, when properly executed and
delivered to a shipper, is evidence that the carrier has received
the goods described therein for shipment.—Ordinarily, a receipt
is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie,
but not conclusive, evidence of delivery to the carrier. A bill of
lading, when properly executed and delivered to a shipper, is
evidence that the carrier has received the goods described
therein for shipment. Except as modified by statute, it is a
general rule as to the parties to a contract of carriage of goods
in connection with which a bill of lading is issued reciting that
goods have been received for transportation, that the recital
being in essence a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or other evidence.
Same; Same; Observance of extraordinary diligence, when it
commences.—Explicit is the rule under Article 1736 of the Civil
Code that the extraordinary responsibility of the common carrier
begins from the time the goods are delivered to the carrier. This
responsibility remains in full force and effect even when they are
temporarily unloaded or stored in transit, unless the shipper or
owner exercises the right of stoppage in transitu, and terminates
only after the lapse of a reasonable time for the acceptance of
the goods by the consignee or such other person entitled to
receive them. And, there is delivery to the carrier when the goods
are ready for and have been placed in the exclusive possession,
custody and control of the carrier for the purpose of their under the circumstances, as a condition of receiving and
immediate transportation and the carrier has accepted them. transporting such goods.
Where such a delivery has thus been accepted by the carrier,
Same; Same; Interpretation of contracts.—The hornbook rule on
the liability of the common carrier commences eo instanti.
interpretation of contracts consecrates the primacy of the
Hence, while we agree with petitioners that the extraordinary
intention of the parties, the same having the force of law between
diligence statutorily required to be observed by the carrier
them. When the terms of the agreement are clear and explicit,
instantaneously commences upon delivery of the goods thereto,
that they do not justify an attempt to read into any alleged
for such duty to commence there must in fact have been delivery
intention of the parties, the terms are to be understood literally
of the cargo subject of the contract of carriage. Only when such
just as they appear on the face of the contract. The various
fact of delivery has been unequivocally established can the
stipulations of a contract shall be interpreted together and such
liability for loss, destruction or deterioration of goods in the
a construction is to be adopted as will give effect to all provisions
custody of the carrier, absent the excepting causes under Article
thereof. A contract cannot be construed by parts, but its clauses
1734, attach and the presumption of fault of the carrier under
should be interpreted in relation to one another. The whole
Article 1735 be invoked.
contract must be interpreted or read together in order to arrive
Same; Same; Right of carrier to require good faith on the part of at its true meaning. Certain stipulations cannot be segregated
shipper; Duty of carrier to make general inquiry as to nature of and then made to control; neither do particular words or
articles shipped.—It is the right of the carrier to require good phrases necessarily determine the character of a contract. The
faith on the part of those persons who deliver goods to be legal effect of the contract is not to be determined alone by any
carried, or enter into contracts with it, and inasmuch as the particular provision disconnected from all others, but in the
freight may depend on the value of the article to be carried, the ruling intention of the parties as gathered from all the language
carrier ordinarily has the right to inquire as to its value. they have used and from their contemporaneous and
Ordinarily, too, it is the duty of the carrier to make inquiry as to subsequent acts.
the general nature of the articles shipped and of their value
Same; Same; Carrier’s liability for delay.—The oft-repeated rule
before it consents to carry them; and its failure to do so cannot
regarding a carrier’s liability for delay is that in the absence of a
defeat the shipper’s right to recovery of the full value of the
special contract, a carrier is not an insurer against delay in
package if lost, in the absence of showing of fraud or deceit on
transportation of goods. When a common carrier undertakes to
the part of the shipper. In the absence of more definite
convey goods, the law implies a contract that they shall be
information, the carrier has the right to accept shipper’s marks
delivered at destination within a reasonable time, in the absence
as to the contents of the package offered for transportation and
of any agreement as to the time of delivery. But where a carrier
is not bound to inquire particularly about them in order to take
has made an express contract to transport and deliver property
advantage of a false classification and where a shipper expressly
within a specified time, it is bound to fulfill its contract and is
represents the contents of a package to be of a designated
liable for any delay, no matter from what cause it may have
character, it is not the duty of the carrier to ask for a repetition
arisen. This result logically follows from the well-settled rule that
of the statement nor disbelieve it and open the box and see for
where the law creates a duty or charge, and the party is disabled
itself. However, where a common carrier has reasonable ground
from performing it without any default in himself, and has no
to suspect that the offered goods are of a dangerous or illegal
remedy over, then the law will excuse him, but where the party
character, the carrier has the right to know the character of such
by his own contract creates a duty or charge upon himself, he is
goods and to insist on an inspection, if reasonable and practical
bound to make it good notwithstanding any accident or delay by
inevitable necessity because he might have provided against it
by contract. Whether or not there has been such an undertaking
on the part of the carrier is to be determined from the
circumstances surrounding the case and by application of the
ordinary rules for the interpretation of contracts.
Same; Same; Acceptance of bill of lading without dissent.—There
is a holding in most jurisdictions that the acceptance of a bill of
lading without dissent raises a presumption that all terms
therein were brought to the knowledge of the shipper and agreed
to by him, and in the absence of fraud or mistake, he is estopped
from thereafter denying that he assented to such terms. This
rule applies with particular force where a shipper accepts a bill
of lading with full knowledge of its contents, and acceptance
under such circumstances makes it a binding contract. In order
that any presumption of assent to a stipulation in a bill of lading
limiting the liability of a carrier may arise, it must appear that
the clause containing this exemption from liability plainly
formed a part of the contract contained in the bill of lading. A
stipulation printed on the back of a receipt or bill of lading or on
papers attached to such receipt will be quite as effective as if
printed on its face, if it is shown that the consignor knew of its
terms. Thus, where a shipper accepts a receipt which states that
its conditions are to be found on the back, such receipt comes
within the general rule, and the shipper is held to have accepted
and to be bound by the conditions there to be found.
Same; Same; Contracts of adhesion.—Granting arguendo that
Condition No. 5 partakes of the nature of a contract of adhesion
and as such must be construed strictly against the party who
drafted the same or gave rise to any ambiguity therein, it should
be borne in mind that a contract of adhesion may be struck
down as void and unenforceable, for being subversive of public
policy, only when the weaker party is imposed upon in dealing
with the dominant bargaining party and is reduced to the
alternative of taking it or leaving it, completely deprived of the
opportunity to bargain on equal footing. However, Ong Yiu vs.
Court of Appeals, et al. instructs us that contracts of adhesion
are not entirely prohibited. The one who adheres to the contract
is in reality free to reject it entirely; if he adheres, he gives his
consent. Accordingly, petitioners, far from being the weaker
party in this situation, duly signified their presumed assent to
all terms of the contract through their acceptance of the airway
bill and are consequently bound thereby. It cannot be gainsaid
that petitioners were not without several choices as to carriers
in Chicago with its numerous airways and airlines servicing the
same.
PETITION for review on certiorari of the decision of the Court of
Appeals. Imperial, J.
The facts are stated in the opinion of the Court.
Ledesma, Saludo & Associates for petitioners.
Quisumbing, Torres & Evangelista for Trans World Airlines,
Inc.
Siguion Reyna, Montecillo & Ongsiako for Phil. Airlines, Inc.
REGALADO, J.:
Assailed in this petition for review on certiorari is the decision in
CA-G.R. CV No. 20951 of respondent Court of Appeals1 which
affirmed the decision of the trial court2 dismissing for lack of
evidence herein petitioners’ complaint in Civil Case No. R-2101
of the then Court of First Instance of Southern Leyte, Branch I.
The facts, as recounted by the court a quo and adopted by
respondent court after “considering the evidence on record,” are
as follows:
“After the death of plaintiffs’ mother, Crispina Galdo Saludo, in
Chicago, Illinois, (on) October 23, 1976 (Exh. A), Pomierski and
Son Funeral Home of Chicago, made the necessary preparations
and arrangements for the shipment of the remains from Chicago
to the Philippines. The funeral home had the remains embalmed
(Exh. D) and secured a permit for the disposition of dead human
body on October 25, 1976 (Exh. C), Philippine Vice Consul in
Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on October
26, 1976 at the Pomierski & Son Funeral Home, sealed the
shipping case containing a hermetically sealed casket that is
airtight and waterproof wherein was contained the remains of
Crispina Saludo Galdo (sic) (Exh. B). On the same date, October
26, 1976, Pomierski brought the remains to C.M.A.S
(Continental Mortuary Air Services) at the airport (Chicago)
which made the necessary arrangements such as flights,
transfers, etc.; C.M.A.S. is a national service used by
undertakers throughout the nation (U.S.A.), they furnish the air
pouch which the casket is enclosed in, and they see that the
remains are taken to the proper air freight terminal (Exh. 6-
TWA). C.M.A.S. booked the shipment with PAL thru the carrier’s
agent Air Care International, with Pomierski F.H. as the shipper
and Mario (Maria) Saludo as the consignee. PAL Airway Bill No.
079-01180454 Ordinary was issued wherein the requested
routing was from Chicago to San Francisco on board TWA Flight
131 of October 27, 1976, and from San Francisco to Manila on
board PAL Flight No. 107 of the same date, and from Manila to
Cebu on board PAL Flight 149 of October 29, 1976 (See Exh. E.,
Also Exh. 1-PAL).
“In the meantime, plaintiffs Maria Salvacion Saludo and
Saturnino Saludo, thru a travel agent, were booked with United
Airlines from Chicago to California, and with PAL from California
to Manila. She then went to the funeral director of Pomierski
Funeral Home who had her mother’s remains and she told the
director that they were booked with United Airlines. But the
director told her that the remains were booked with TWA flight
to California. This upset her, and she and her brother had to
change reservations from UA to the TWA flight after she
confirmed by phone that her mother’s remains would be on that
TWA flight. They went to the airport and watched from the look-
out area. She saw no body being brought. So, she went to the
TWA counter again, and she was told there was no body on that
flight. Reluctantly, they took the TWA flight upon assurance of
her cousin, Ani Bantug, that he would look into the matter and
inform her about it on the plane or have it radioed to her. But
no confirmation from her cousin reached her that her mother
was on the West Coast.
“Upon arrival at San Francisco at about 5:00 p.m., she went to
the TWA counter there to inquire about her mother’s remains.
She was told they did not know anything about it.
“She then called Pomierski that her mother’s remains were not
at the West Coast terminal, and Pomierski immediately called
C.M.A.S., which in a matter of 10 minutes informed him that the
remains were on a plane to Mexico City, that there were two
bodies at the terminal, and somehow they were switched; he
relayed this information to Miss Saludo in California; later
C.M.A.S. called and told him they were sending the remains
back to California via Texas (see Exh. 6-TWA). “It turned out that
TWA had carried a shipment under PAL Airway Bill No. 079-
ORD-01180454 on TWA Flight 603 of October 27, 1976, a flight
earlier than TWA Flight 131 of the same date. TWA delivered or
transferred the said shipment said to contain human remains to
PAL at 1400H or 2:00 p.m. of the same date, October 27, 1976
(See Exh. 1-TWA). ‘Due to a switch(ing) in Chicago’, this
shipment was withdrawn from PAL by CMAS at 1805H (or 6:05
p.m.) of the same date, October 27 (Exh. 3-PAL, see Exh. 3-a-
PAL).
“What transpired at the Chicago (A)irport is explained in a memo
or incident report by Pomierski (Exh. 6-TWA) to Pomierski’s
lawyers who in turn referred to said memo and enclosed it in
their (Pomierski’s lawyers) answer dated July 18, 1981 to herein
plaintiff’s counsel (See Exh. 5-TWA). In that memo or incident
report (Exh. 6-TWA), it is stated that the remains (of Crispina
Saludo) were taken to CMAS at the airport; that there were two
bodies at the (Chicago Airport) terminal, and somehow they were
switched, that the remains (of Crispina Saludo) were on a plane
to Mexico City; that CMAS is a national service used by
undertakers throughout the nation (U.S.A.), makes all the
necessary arrangements, such as flights, transfers, etc., and
see(s) to it that the remains are taken to the proper air freight
terminal.
“The following day October 28, 1976, the shipment or remains
of Crispina Saludo arrived (in) San Francisco from Mexico on
board American Airlines. This shipment was transferred to or
received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-
PAL). This casket bearing the remains of Crispina Saludo, which
was mistakenly sent to Mexico and was opened (there), was
resealed by Crispin F. Padagas for shipment to the Philippines
(See Exh. B-1). The shipment was immediately loaded on PAL
flight for Manila that same evening and arrived (in) Manila on
October 30, 1976, a day after its expected arrival on October 29,
1976.”
In a letter dated December 15, 1976,4 petitioners’ counsel
informed private respondent Trans World Airlines (TWA) of the
misshipment and eventual delay in the delivery of the cargo
containing the remains of the late Crispina Saludo, and of the
discourtesy of its employees to petitioners Maria Salvacion
Saludo and Saturnino Saludo. In a separate letter on June 10,
1977 addressed to co-respondent Philippine Airlines (PAL),5
petitioners stated that they were holding PAL liable for said delay
in delivery and would commence judicial action should no
favorable explanation be given.
Both private respondents denied liability. Thus, a damage suit6
was filed by petitioners before the then Court of First Instance,
Branch III, Leyte, praying for the award of actual damages of
P50,000.00, moral damages of P1,000,000.00, exemplary
damages, attorney’s fees and costs of suit.
As earlier stated, the court below absolved the two respondent
airline companies of liability. The Court of Appeals affirmed the
decision of the lower court in toto, and in a subsequent
resolution,7 denied herein petitioners’ motion for
reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the
conclusions reached by respondent appellate court, petitioners
now urge this Court to review the appealed decision and to
resolve whether or not (1) the delay in the delivery of the
casketed remains of petitioners’ mother was due to the fault of
respondent airline companies, (2) the one-day delay in the
delivery of the same constitutes contractual breach as would
entitle petitioners to damages, (3) damages are recoverable by
petitioners for the humiliating, arrogant and indifferent acts of
the employees of TWA and PAL, and (4) private respondents
should be held liable for actual, moral and exemplary damages,
aside from attorney’s fees and litigation expenses.
At the outset and in view of the spirited exchanges of the parties
on this aspect, it is to be stressed that only questions of law may
be raised in a petition filed in this Court to review on certiorari
the decision of the Court of Appeals.9 This being so, the factual
findings of the Court of Appeals are final and conclusive and
cannot be reviewed by the Supreme Court. The rule, however,
admits of established exceptions, to wit: (a) where there is grave
abuse of discretion; (b) when the finding is grounded entirely on
speculations, surmises or conjectures; (c) when the inference
made is manifestly mistaken, absurd or impossible; (d) when the
judgment of the Court of Appeals was based on a
misapprehension of facts; (e) when the factual findings are
conflicting; (f) when the Court of Appeals, in making its findings,
went beyond the issues of the case and the same are contrary to
the admissions of both appellant and appellee;10 (g) when the
Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly considered, would
justify a different conclusion;11 and (h) where the findings of
fact of the Court of Appeals are contrary to those of the trial
court, or are mere conclusions without citation of specific
evidence, or where the facts set forth by the petitioner are not
disputed by the respondent, or where the findings of fact of the
Court of Appeals are premised on the absence of evidence and
are contradicted by the evidence on record.
To distinguish, a question of law is one which involves a doubt
or controversy on what the law is on a certain state of facts; and,
a question of fact, contrarily, is one in which there is a doubt or
difference as to the truth or falsehood of the alleged facts.13 One
test, it has been held, is whether the appellate court can
determine the issue raised without reviewing or evaluating the
evidence, in which case it is a question of law, otherwise it will
be a question of fact.
Respondent airline companies object to the present recourse of
petitioners on the ground that this petition raises only factual
questions.15 Petitioners maintain otherwise or, alternatively,
they are of the position that, assuming that the petition raises
factual questions, the same are within the recognized exceptions
to the general rule as would render the petition cognizable and
worthy of review by the Court.
Since it is precisely the soundness of the inferences or
conclusions that may be drawn from the factual issues which
are here being assayed, we find that the issues raised in the
instant petition indeed warrant a second look if this litigation is
to come to a reasonable denouement. A discussion seriatim of
said issues will further reveal that the sequence of the events
involved is in effect disputed. Likewise to be settled is whether
or not the conclusions of the Court of Appeals subject of this
review indeed find evidentiary and legal support.
I. Petitioners fault respondent court for “not finding that private
respondents failed to exercise extraordinary diligence required
by law which resulted in the switching and/or misdelivery of the
remains of Crispina Saludo to Mexico causing gross delay in its
shipment to the Philippines, and consequently, damages to
petitioners.”
Petitioners allege that private respondents received the casketed
remains of petitioners’ mother on October 26, 1976, as
evidenced by the issuance of PAL Air Waybill No. 079-
0118045418 by Air Care International as carrier’s agent; and
from said date, private respondents were charged with the
responsibility to et al., 146 SCRA 215 (1986) exercise
extraordinary diligence so much so that for the alleged switching
of the caskets on October 27, 1976, or one day after private
respondents received the cargo, the latter must necessarily be
liable.
To support their assertion, petitioners rely on the
jurisprudential dictum, both under American and Philippine
law, that “(t)he issuance of a bill of lading carries the
presumption that the goods were delivered to the carrier issuing
the bill, for immediate shipment, and it is nowhere questioned
that a bill of lading is prima facie evidence of the receipt of the
goods by the carrier. x x x In the absence of convincing testimony
establishing mistake, recitals in the bill of lading showing that
the carrier received the goods for shipment on a specified date
control (13 C.J.S. 235).”19 A bill of lading is a written
acknowledgment of the receipt of the goods and an agreement to
transport and deliver them at a specified place to a person
named or on his order. Such instrument may be called a
shipping receipt, forwarder’s receipt and receipt for
transportation.20 The designation, however, is immaterial. It
has been held that freight tickets for bus companies as well as
receipts for cargo transported by all forms of transportation,
whether by sea or land, fall within the definition. Under the
Tariff and Customs Code, a bill of lading includes airway bills of
lading.21 The two-fold character of a bill of lading is all too
familiar; it is a receipt as to the quantity and description of the
goods shipped and a contract to transport the goods to the
consignee or other person therein designated, on the terms
specified in such instrument.
Logically, since a bill of lading acknowledges receipt of goods to
be transported, delivery of the goods to the carrier normally
precedes the issuance of the bill; or, to some extent, delivery of
the goods and issuance of the bill are regarded in commercial
practice as simultaneous acts.23 However, except as may be
prohibited by law, there is nothing to prevent an inverse order
of events, that is, the execution of the bill of lading even prior to
actual possession and control by the carrier of the cargo to be
transported. There is no law which requires that the delivery of
the goods for carriage and the issuance of the covering bill of
lading must coincide in point of time or, for that matter, that the
former should precede the latter.
Ordinarily, a receipt is not essential to a complete delivery of
goods to the carrier for transportation but, when issued, is
competent and prima facie, but not conclusive, evidence of
delivery to the carrier. A bill of lading, when properly executed
and delivered to a shipper, is evidence that the carrier has
received the goods described therein for shipment. Except as
modified by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a bill of
lading is issued reciting that goods have been received for
transportation, that the recital being in essence a receipt alone,
is not conclusive, but may be explained, varied or contradicted
by parol or other evidence.
While we agree with petitioners’ statement that “an airway bill
estops the carrier from denying receipt of goods of the quantity
and quality described in the bill,” a further reading and a more
faithful quotation of the authority cited would reveal that “(a) bill
of lading may contain constituent elements of estoppel and thus
become something more than a contract between the shipper
and the carrier. x x x (However), as between the shipper and the
carrier, when no goods have been delivered for shipment no
recitals in the bill can estop the carrier from showing the true
facts x x x. Between the consignor of goods and a receiving
carrier, recitals in a bill of lading as to the goods shipped raise
only a rebuttable presumption that such goods were delivered
for shipment. As between the consignor and a receiving carrier,
the fact must outweigh the recital.”25
For this reason, we must perforce allow explanation by private
respondents why, despite the issuance of the airway bill and the
date thereof, they deny having received the remains of Crispina
Saludo on October 26, 1976 as alleged by petitioners.
The findings of the trial court, as favorably adopted by the Court
of Appeals and which we have earlier quoted, provide us with
the explanation that sufficiently overcomes the presumption
relied on by petitioners in insisting that the remains of their
mother were delivered to and received by private respondents on
October 26, 1976. Thus—
“x x x Philippine Vice Consul in Chicago, Illinois, Bienvenido M.
Llaneta, at 3:00 p.m. on October 26, 1976 at the Pomierski &
Son Funeral Home, sealed the shipping case containing a
hermetically sealed casket that is airtight and waterproof
wherein was contained the remains of Crispina Saludo Galdo
(sic) (Exh. B). On the same date October 26, 1976, Pomierski
brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary
arrangements such as flights, transfers, etc; C.M.A.S. is a
national service used by undertakers throughout the nation
(U.S.A.), they furnish the air pouch which the casket is enclosed
in, and they see that the remains are taken to the proper air
freight terminal (Exh. GTWA). C.M.A.S. booked the shipment
with PAL thru the carrier’s agent Air Care International, with
Pomierski F.H. as the shipper and Mario (Maria) Saludo as the
consignee. PAL Airway Bill No. 079-01180454 Ordinary was
issued wherein the requested routing was from Chicago to San
Francisco on board TWA Flight 131 of October 27, 1976, and
from San Francisco to Manila on board PAL Flight No. 107 of the
same date, and from Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E, also Exh. 1-PAL).”26 (Emphasis
ours).
Moreover, we are persuaded to believe private respondent PAL’s
account as to what transpired on October 26, 1976:
“x x x Pursuant thereto, on 26 October 1976, CMAS acting upon
the instruction of Pomierski, F.H., the shipper requested
booking of the casketed remains of Mrs. Cristina (sic) Saludo on
board PAL’s San Francisco-Manila Flight No. PR 107 on October
27, 1976.
“2. To signify acceptance and confirmation of said booking, PAL
issued to said Pomierski F.H., PAL Airway Bill No. 079-
01180454 dated October 27, 1976 (sic, ‘10/26/76'). PAL
confirmed the booking and transporting of the shipment on
board of its Flight PR 107 on October 27, 1976 on the basis of
the representation of the shipper and/or CMAS that the said
cargo would arrive in San Francisco from Chicago on board
United Airlines Flight US 121 on 27 October 1976.”27
 1734, attach and the presumption of fault of the carrier under
Article 1735 be invoked.
In other words, on October 26, 1976 the cargo containing the
casketed remains of Crispina Saludo was booked for PAL Flight
Number PR-107 leaving San Francisco for Manila on October 27,
As already demonstrated, the facts in the case at bar belie the
1976, PAL Airway Bill No. 079-01180454 was issued, not as
averment that there was delivery of the cargo to the carrier on
evidence of receipt of delivery of the cargo on October 26, 1976,
October 26, 1976. Rather, as earlier explained, the body
but merely as a confirmation of the booking thus made for the
intended to be shipped as agreed upon was really placed in the
San Francisco-Manila flight scheduled on October 27, 1976.
possession and control of PAL on October 28, 1976 and it was
Actually, it was not until October 28, 1976 that PAL received
from that date that private respondents became responsible for
physical delivery of the body at San Francisco, as duly evidenced
the agreed cargo under their undertakings in PAL Airway Bill
by the Interline Freight Transfer Manifest of the American Airline
No. 079-01180454. Consequently, for the switching of caskets
Freight System and signed for by Virgilio Rosales at 1945H, or
prior thereto which was not caused by them, and subsequent
7:45 P.M. on said date.
events caused thereby, private respondents cannot be held
Explicit is the rule under Article 1736 of the Civil Code that the liable.
extraordinary responsibility of the common carrier begins from
Petitioners, proceedings on the premise that there was delivery
the time the goods are delivered to the carrier. This
of the cargo to private respondents on October 26, 1976 and that
responsibility remains in full force and effect even when they are
the latter’s extraordinary responsibility had by then become
temporarily unloaded or stored in transit, unless the shipper or
operative, insist on foisting the blame on private respon-dents
owner exercises the right of stoppage in transitu,29 and
for the switching of the two caskets which occurred on October
terminates only after the lapse of a reasonable time for the
27, 1976. It is argued that since there is no clear evidence
acceptance of the goods by the consignee or such other person
establishing the fault of Continental Mortuary Air Services
entitled to receive them.30 And, there is delivery to the carrier
(CMAS) for the mix-up, private respondents are presumably
when the goods are ready for and have been placed in the
negligent pursuant to Article 1735 of the Civil Code and, for
exclusive possession, custody and control of the carrier for the
failure to rebut such presumption, they must necessarily be
purpose of their immediate transportation and the carrier has
held liable; or, assuming that CMAS was at fault, the same does
accepted them.31 Where such a delivery has thus been accepted
not absolve private respondents of liability because whoever
by the carrier, the liability of the common carrier commences eo
brought the cargo to the airport or loaded it on the plane did so
instanti.
as agent of private respondents.
Hence, while we agree with petitioners that the extraordinary
This contention is without merit. As pithily explained by the
diligence statutorily required to be observed by the carrier
Court of Appeals:
instantaneously commences upon delivery of the goods thereto,
for such duty to commence there must in fact have been delivery “The airway bill expressly provides that ‘Carrier certifies goods
of the cargo subject of the contract of carriage. Only when such described below were received for carriage’, and said cargo was
fact of delivery has been unequivocally established can the ‘casketed human remains of Crispina Saludo,’ with ‘Maria
liability for loss, destruction or deterioration of goods in the Saludo as Consignee; Pomierski F.H. as Shipper; Air Care
custody of the carrier, absent the excepting causes under Article International as carrier’s agent.’ On the face of the said airway
bill, the specific flight numbers, specific routes of shipment and
dates of departure and arrival were typewritten, to wit: Chicago
TWA Flight 131/27 to San Francisco and from San Francisco by
PAL 107 on October 27, 1976 to Philippines and to Cebu via PAL
Flight 149 on October 29, 1976. The airway bill also contains
the following typewritten words, as follows: ‘all documents have
been examined (sic). Human remains of Crispina Saludo. Please
return back (sic) first available flight to SFO.
“But, as it turned out and was discovered later the casketed
human remains which was issued PAL Airway Bill #079-
01180454 was not the remains of Crispina Saludo, the casket
containing her remains having been shipped to Mexico City.
“However, it should be noted that, Pomierski F.H., the shipper
of Mrs. Saludo’s remains, hired Continental Mortuary Services
(hereafter referred to as C.M.A.S.), which is engaged in the
business of transporting and forwarding human remains. Thus,
C.M.A.S. made all the necessary arrangements—such as flights,
transfers, etc.—for shipment of the remains of Crispina Saludo.
‘The remains were taken on October 26th, 1976, to C.M.A.S. at
the airport. These people made all the necessary arrangements,
such as flights, transfers, etc. This is a national service used by
undertakers throughout the nation. They furnished the air
pouch which the casket is enclosed in, and they see that the
remains are taken to the proper air freight terminal. I was very
surprised when Miss Saludo called me to say that the remains
were not at the west coast terminal. I immediately called
C.M.A.S. They called me back in a matter of ten minutes to
inform me that the remains were on a plane to Mexico City. The
man said that there were two bodies at the terminal, and
somehow they were switched. x x x (Exh. 6—‘TWA’, which is the
memo or incident report enclosed in the stationery of Walter
Pomierski & Sons Ltd.)’
“Consequently, when the cargo was received from C.M.A.S. at
the Chicago airport terminal for shipment, which was supposed
to contain the remains of Crispina Saludo, Air Care
International and/or TWA, had no way of determining its actual
contents, since the casket was hermetically sealed by the
Philippine Vice-Consul in Chicago and in an air pouch of
C.M.A.S., to the effect that Air Care International and/or TWA
had to rely on the information furnished by the shipper
regarding the cargo’s content. Neither could Air Care
International and/or TWA open the casket for further
verification, since they were not only without authority to do so,
but even prohibited.
“Thus, under said circumstances, no fault and/or negligence
can be attributed to PAL (even if Air Care International should
be considered as an agent of PAL) and/or TWA, the entire fault
or negligence being exclusively with C.M.A.S.”33 (Emphasis
supplied.)
It can correctly and logically be concluded, therefore, that the
switching occurred or, more accurately, was discovered on
October 27, 1976; and based on the above findings of the Court
of Appeals, it happened while the cargo was still with CMAS, well
before the same was placed in the custody of private
respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October
27, 197634 was signed by Garry Marcial of PAL at 1400H, or
2:00 P.M., on the same date, thereby indicating
acknowledgment by PAL of the transfer to them by TWA of what
was in truth the erroneous cargo, said misshipped cargo was in
fact withdrawn by CMAS from PAL as shown by the notation on
another copy of said manifest35 stating “Received by CMAS—
Due to switch in Chicago 10/27-1805H,” the authenticity of
which was never challenged. This shows that said misshipped
cargo was in fact withdrawn by CMAS from PAL and the correct
shipment containing the body of Crispina Saludo was received
by PAL only on October 28, 1976, at 1945H, or 7:45 P.M., per
American Airlines Interline Freight Transfer Manifest No.
AA204312.36 Witness the deposition of TWA’s ramp serviceman,
Michael Giosso, on this matter:
“ATTY. JUAN COLLAS, JR.: ATTY. JUAN COLLAS, JR.:

On that date, do (sic) you have occasion to handle or deal with This Exhibit I-TWA, could you tell what it is, what it shows?
the transfer of cargo from TWA Flight No. 603 to PAL San
MICHAEL GIOSSO:
Francisco?
It shows transfer of manifest on 10-27-76 to PAL at 1400 and
MICHAEL GIOSSO:
verified with two signatures as it completed the transfer.
Yes, I did.
ATTY. JUAN COLLAS, JR.:
ATTY. JUAN COLLAS, JR.:
Very good, Who was the PAL employee who received the cargo?
What was your participation with the transfer of the cargo?
MICHAEL GIOSSO:
Saludo, Jr. vs. Court of Appeals
The name is Garry Marcial.”37
MICHAEL GIOSSO:
The deposition of Alberto A. Lim, PAL’s cargo supervisor at San
I manifested the freight on a transfer manifest and physically Francisco, as deponent-witness for PAL, makes this further
moved it to PAL and concluded the transfer by signing it off. clarification:
ATTY. JUAN COLLAS, JR.: “ATTY. CESAR P. MANALAYSAY:
You brought it there yourself? You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL
Airway Bill Number 01180454 which for purposes of evidence, I
MICHAEL GIOSSO:
would like to request that the same be marked as evidence
Yes, sir. Exhibit I for PAL.

ATTY. JUAN COLLAS, JR.: xxx

Do you have anything to show that PAL received the cargo from In what circumstances did you encounter Exhibit I-PAL?
TWA on October 27, 1976?
ALBERTO A. LIM:
MICHAEL GIOSSO:
If I recall correctly, I was queried by Manila, our Manila office
Yes, I do. with regard to a certain complaint that a consignee filed that this
shipment did not arrive on the day that the consignee expects
(Witness presenting a document) the shipment to arrive.
ATTY. JUAN COLLAS, JR.: ATTY. CESAR P. MANALAYSAY:
For purposes of clarity, Exhibit I is designated as Exhibit I-TWA. Okay. Now, upon receipt of that query from your Manila office,
xxx did you conduct any investigation to pinpoint the possible
causes of mishandling?
ALBERTO A. LIM: Yes. We have on our records a Transfer Manifest from American
Airlines Number 204312 showing that we received a human
Yes.
remains shipment belong to Mrs. Cristina (sic) Saludo or the
xxx human remains of Mrs. Cristina (sic) Saludo.

ATTY. CESAR P. MANALAYSAY: ATTY. CESAR P. MANALAYSAY:

What is the result of your investigation? At this juncture, may I request that the Transfer Manifest
referred to by the witness be marked as an evidence as Exhibit
ALBERTO A. LIM: II-PAL.
In the course of my investigation, I found that we received the xxx
body on October 28, 1976, from American Airlines.
Mr. Lim, yesterday your co-defendant TWA presented as their
ATTY. CESAR P. MANALAYSAY: Exhibit I evidence tending to show that on October 27, 1976 at
What body are you referring to? about 2:00 in the afternoon they delivered to you a cargo bearing
human remains. Could you go over this Exhibit I and please give
xxx us your comments as to that exhibit?
ALBERTO A. LIM: ATTY. ALBERTO C. MENDOZA:
The remains of Mrs. Cristina (sic) Saludo. That is a vague question. I would rather request that counsel
propound specific questions rather than asking for comments
ATTY. CESAR P. MANALAYSAY:
on Exhibit I-TWA.
Is that the same body mentioned in this Airway Bill?
ATTY. CESAR P. MANALAYSAY:
ALBERTO A. LIM:
In that case, I will reform my question. Could you tell us whether
Yes. TWA in fact delivered to you the human remains as indicated in
that Transfer Manifest?
ATTY. CESAR P. MANALAYSAY:
ALBERTO A. LIM:
What time did you receive said body on October 28, 1976?
Yes, they did.
ALBERTO A. LIM:
ATTY. CESAR P. MANALAYSAY:
If I recall correctly, approximately 7:45 of October 28, 1976.
I noticed that the Transfer Manifest of TWA marked as Exhibit
ATTY. CESAR P. MANALAYSAY:
I-TWA bears the same numbers or the same entries as the
Do you have any proof with you to back the statement? Airway Bill marked as Exhibit I-A PAL tending to show that this
is the human remains of Mrs. Cristina (sic) Saludo. Could you
ALBERTO A. LIM: tell us whether this is true?
ALBERTO A. LIM:
It is true that we received human remains shipment from TWA
as indicated on this Transfer Manifest. But in the course of
investigation, it was found out that the human remains
transferred to us is not the remains of Mrs. Cristina (sic) Saludo
which is the reason why we did not board it on our flight.”
Petitioners consider TWA’s statement that “it had to rely on the
information furnished by the shipper” a lame excuse and that
its failure to prove that its personnel verified and identified the
contents of the casket before loading the same constituted
negligence on the part of TWA.
We uphold the favorable consideration by the Court of Appeals
of the following findings of the trial court:
“It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son
Funeral Home delivered the casket containing the remains of
Crispina Saludo. TWA would have no knowledge therefore that
the remains of Crispina Saludo were not the ones inside the
casket that was being presented to it for shipment. TWA would
have to rely on the representations of C.M.A.S. The casket was
hermetically sealed and also sealed by the Philippine Vice
Consul in Chicago. TWA or any airline for that matter would not
have opened such a sealed casket just for the purpose of
ascertaining whose body was inside and to make sure that the
remains inside were those of the particular person indicated to
be by C.M.A.S. TWA had to accept whatever information was
being furnished by the shipper or by the one presenting the
casket for shipment. And so as a matter of fact, TWA carried to
San Francisco and transferred to defendant PAL a shipment
covered by or under PAL Airway Bill No. 079-ORD-01180454,
the airway bill for the shipment of the casketed remains of
Crispina Saludo. Only, it turned out later, while the casket was
already with PAL, that what was inside the casket was not the
body of Crispina Saludo so much so that it had to be withdrawn
by C.M.A.S. from PAL. The body of Crispina Saludo had been
shipped to Mexico. The casket containing the remains of
Crispina Saludo was transshipped from Mexico and arrived in
San Francisco the following day on board American Airlines. It
was immediately loaded by PAL on its flight for Manila.
“The foregoing points at C.M.A.S., not defendant TWA much less
defendant PAL, as the ONE responsible for the switching or mix-
up of the two bodies at the Chicago Airport terminal, and started
a chain reaction of the misshipment of the body of Crispina
Saludo and a one-day delay in the delivery thereof to its
destination.
Verily, no amount of inspection by respondent airline companies
could have guarded against the switching that had already
taken place. Or, granting that they could have opened the casket
to inspect its contents, private respondents had no means of
ascertaining whether the body therein contained was indeed
that of Crispina Saludo except, possibly, if the body was that of
a male person and such fact was visually apparent upon opening
the casket. However, to repeat, private respondents had no
authority to unseal and open the same nor did they have any
reason or justification to resort thereto.
It is the right of the carrier to require good faith on the part of
those persons who deliver goods to be carried, or enter into
contracts with it, and inasmuch as the freight may depend on
the value of the article to be carried, the carrier ordinarily has
the right to inquire as to its value. Ordinarily, too, it is the duty
of the carrier to make inquiry as to the general nature of the
articles shipped and of their value before it consents to carry
them; and its failure to do so cannot defeat the shipper’s right
to recovery of the full value of the package if lost, in the absence
of showing of fraud or deceit on the part of the shipper. In the
absence of more definite information, the carrier has the right to
accept shipper’s marks as to the contents of the package offered
for transportation and is not bound to inquire particularly about
them in order to take advantage of a false classification and
where a shipper expressly represents the contents of a package
to be of a designated character, it is not the duty of the carrier
to ask for a repetition of the statement nor disbelieve it and open
the box and see for itself.41 However, where a common carrier
has reasonable ground to suspect that the offered goods are of
a dangerous or illegal character, the carrier has the right to
know the character of such goods and to insist on an inspection, remains was indeed at fault, the liability therefor would
if reasonable and practical under the circumstances, as a supposedly still be attributable to private respondents.
condition of receiving and transporting such goods.
While we agree that the actual participation of CMAS has been
It can safely be said then that a common carrier is entitled to sufficiently and correctly established, to hold that it acted as
fair representation of the nature and value of the goods to be agent for private respondents would be both an inaccurate
carried, with the concomitant right to rely thereon, and further appraisal and an unwarranted categorization of the legal
noting at this juncture that a carrier has no obligation to inquire position it held in the entire transaction.
into the correctness or sufficiency of such information. The
It bears repeating that CMAS was hired to handle all the
consequent duty to conduct an inspection thereof arises in the
necessary shipping arrangements for the transportation of the
event that there should be reason to doubt the veracity of such
human remains of Crispina Saludo to Manila. Hence, it was to
representations. Therefore, to be subjected to unusual search,
CMAS that the Pomierski & Son Funeral Home, as shipper,
other than the routinary inspection procedure customarily
brought the remains of petitioners’ mother for shipment, with
undertaken, there must exist proof that would justify cause for
Maria Saludo as consignee. Thereafter, CMAS booked the
apprehension that the baggage is dangerous as to warrant
shipment with PAL through the carrier’s agent, Air Care
exhaustive inspection, or even refusal to accept carriage of the
International.45 With its aforestated functions, CMAS may
same; and it is the failure of the carrier to act accordingly in
accordingly be classified as a forwarder which, by accepted
theface of such proof that constitutes the basis of the common
commercial practice, is regarded as an agent of the shipper and
carrier’s liability.
not of the carrier. As such, it merely contracts for the
In the case at bar, private respondents had no reason transportation of goods by carriers, and has no interest in the
whatsoever to doubt the truth of the shipper’s representations. freight but receives compensation from the shipper as his agent.
The airway bill expressly providing that “carrier certifies goods
At this point, it can be categorically stated that, as culled from
received below were received for carriage,” and that the cargo
the findings of both the trial court and appellate courts, the
contained “casketed human remains of Crispina Saludo,” was
entire chain of events which culminated in the present
issued on the basis of such representations. The reliance
controversy was not due to the fault or negligence of private
thereon by private respondents was reasonable and, for so
respondents. Rather, the facts of the case would point to CMAS
doing, they cannot be said to have acted negligently. Likewise,
as the culprit. Equally telling of the more likely possibility of
no evidence was adduced to suggest even an iota of suspicion
CMAS’ liability is petitioners’ letter to and demanding an
that the cargo presented for transportation was anything other
explanation from CMAS regarding the statement of private
than what it was declared to be, as would require more than
respondents laying the blame on CMAS for the incident, portions
routine inspection or call for the carrier to insist that the same
of which, reading as follows:
be opened for scrutiny of its contents per declaration.
“x x x we were informed that the unfortunate a mix-up occurred
Neither can private respondents be held accountable on the
due to your negligence. x x x.
basis of petitioner’s preposterous proposition that whoever
brought the cargo to the airport or loaded it on the airplane did “Likewise, the two airlines pinpoint the responsibility upon your
so as agent of private respondents, so that even if CMAS whose agents. Evidence were presented to prove that allegation.
services were engaged for the transit arrangements for the
“On the face of this overwhelming evidence we could and should In addition, petitioners maintain that since there is no evidence
have filed a case against you. x x x.” as to who placed the body on board Flight 603, or that CMAS
actually put the cargo on that flight, or that the two caskets at
clearly allude to CMAS as the party at fault. This is tantamount
the Chicago airport were to be transported by the same airline,
to an admission by petitioners that they consider private
or that they came from the same funeral home, or that both
respondents without fault, or is at the very least indicative of the
caskets were received by CMAS, then the employees or agents of
fact that petitioners entertained serious doubts as to whether
TWA presumably caused the mix-up by loading the wrong casket
herein private respondents were responsible for the unfortunate
on the plane. For said error, they contend, TWA must
turn of events.
necessarily be presumed negligent and this presumption of
Undeniably, petitioners’ grief over the death of their mother was negligence stands undisturbed unless rebutting evidence is
aggravated by the unnecessary inconvenience and anxiety that presented to show that the switching or misdelivery was due to
attended their efforts to bring her body home for a decent burial. circumstances that would exempt the carrier from liability.
This is unfortunate and calls for sincere commiseration with
Private respondent TWA professes otherwise. Having duly
petitioners. But, much as we would like to give them consolation
delivered or transferred the cargo to its co-respondent PAL on
for their undeserved distress, we are barred by the inequity of
October 27, 1976 at 2:00 P.M., as supported by the TWA
allowing recovery of the damages prayed for by them at the
Transfer Manifest, TWA faithfully complied with its obligation
expense of private respondents whose fault or negligence in the
under the airway bill. Said faithful compliance was not affected
very acts imputed to them has not been convincingly and legally
by the fact that the remains were shipped on an earlier flight as
demonstrated.
there was no fixed time for completion of carriage stipulated on.
Neither are we prepared to delve into, much less definitively rule Moreover, the carrier did not undertake to carry the cargo
on, the possible liability of CMAS as the evaluation and aboard any specified aircraft, in view of the condition on the
adjudication of the same is not what is presently at issue here back of the airway bill which provides:
and is best deferred to another time and addressed to another
“CONDITIONS OF CONTRACT
forum.
xxx
II. Petitioners further fault the Court of Appeals for ruling that
there was no contractual breach on the part of private “It is agreed that no time is fixed for the completion of carriage
respondents as would entitle petitioners to damages. hereunder and that Carrier may without notice substitute
alternate carriers or aircraft. Carrier assumes no obligation to
Petitioners hold that respondent TWA, by agreeing to transport
carry the goods by any specified aircraft or over any particular
the remains of petitioners’ mother on its Flight 131 from Chicago
route or routes or to make connection at any point according to
to San Francisco on October 27, 1976, made itself a party to the
any particular schedule, and Carrier is hereby authorized to
contract of carriage and, therefore, was bound by the terms of
select, or deviate from the route or routes of shipment,
the issued airway bill. When TWA undertook to ship the remains
notwithstanding that the same may be stated on the face hereof.
on its Flight 603, ten hours earlier than scheduled, it supposedly
The shipper guarantees payment of all charges and advances.”
violated the express agreement embodied in the airway bill. It
Hence when respondent TWA shipped the body on an earlier
was allegedly this breach of obligation which compounded, if not
flight and on a different aircraft, it was acting well within its
directly caused, the switching of the caskets.
rights. We find this argument tenable.

The contention that there was contractual breach on the part of
private respondents is founded on the postulation that there was
ambiguity in the terms of the airway bill, hence petitioners’
insistence on the application of the rules on interpretation of
contracts and documents. We find no such ambiguity. The terms
are clear enough as to preclude the necessity to probe beyond
the apparent intendment of the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the
primacy of the intention of the parties, the same having the force
of law between them. When the terms of the agreement are clear
and explicit, that they do not justify an attempt to read into any
alleged intention of the parties, the terms are to be understood
literally just as they appear on the face of the contract.49 The
various stipulations of a contract shall be interpreted together50
and such a construction is to be adopted as will give effect to all
provisions thereof.51 A contract cannot be construed by parts,
but its clauses should be interpreted in relation to one another.
The whole contract must be interpreted or read together in order
to arrive at its true meaning. Certain stipulations cannot be
segregated and then made to control; neither do particular
words or phrases necessarily determine the character of a
contract. The legal effect of the contract is not to be determined
alone by any particular provision disconnected from all others,
but in the ruling intention of the parties as gathered from all the
language they have used and from their contemporaneous and
subsequent acts.
Turning to the terms of the contract at hand, as presented by
PAL Air Waybill No. 079-01180454, respondent court
approvingly quoted the trial court’s disquisition on the
aforequoted condition appearing on the reverse side of the
airway bill and its disposition of this particular assigned error:
“The foregoing stipulation fully answers plaintiffs’ objections to
the one-day delay and the shipping of the remains in TWA Flight
603 instead of TWA Flight 131. Under the stipulation, parties
agreed that no time was fixed to complete the contract of
carriage and that the carrier may, without notice, substitute
alternate carriers or aircraft. The carrier did not assume the
obligation to carry the shipment on any specified aircraft.
xxx
“Furthermore, contrary to the claim of plaintiffs-appellants, the
conditions of the Air Waybill are big enough to be read and
noticed. Also, the mere fact that the cargo in question was
shipped in TWA Flight 603, a flight earlier on the same day than
TWA Flight 131, did not in any way cause or add to the one-day
delay complained of and/or the switching or mix-up of the
bodies.”
Indubitably, that private respondent can use substitute aircraft
even without notice and without the assumption of any
obligation whatsoever to carry the goods on any specified aircraft
is clearly sanctioned by the contract of carriage as specifically
provided for under the conditions thereof.
Petitioners’ invocation of the interpretative rule in the Rules of
Court that written words control printed words in documents,54
to bolster their assertion that the typewritten provisions
regarding the routing and flight schedule prevail over the printed
conditions, is tenuous. Said rule may be considered only when
there is inconsistency between the written and printed words of
the contract.
As previously stated, we find no ambiguity in the contract
subject of this case that would call for the application of said
rule. In any event, the contract has provided for such a situation
by explicitly stating that the above condition remains effective
“notwithstanding that the same (fixed time for completion of
carriage, specified aircraft, or any particular route or schedule)
may be stated on the face hereof.” While petitioners hinge private
respondents’ culpability on the fact that the carrier “certifies
goods described below were received for carriage,” they may have
overlooked that the statement on the face of the airway bill
properly and completely reads—
“Carrier certifies goods described below were received for
carriage subject to the Conditions on the reverse hereof the
goods then being in apparent good order and condition except
as noted hereon.”
Private respondents further aptly observe that the carrier’s
certification regarding receipt of the goods for carriage “was of a
smaller print than the condition of the Air Waybill, including
Condition No. 5—and thus if plaintiffs-appellants had
recognized the former, then with more reason they were aware
of the latter.”
In the same vein, it would also be incorrect to accede to the
suggestion of petitioners that the typewritten specifications of
the flight, routes and dates of departures and arrivals on the
face of the airway bill constitute a special contract which
modifies the printed conditions at the back thereof. We reiterate
that typewritten provisions of the contract are to be read and
understood subject to and in view of the printed conditions, fully
reconciling and giving effect to the manifest intention of the
parties to the agreement.
The oft-repeated rule regarding a carrier’s liability for delay is
that in the absence of a special contract, a carrier is not an
insurer against delay in transportation of goods. When a
common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a
reasonable time, in the absence, of any agreement as to the time
of delivery.57 But where a carrier has made an express contract
to transport and deliver property within a specified time, it is
bound to fulfill its contract and is liable for any delay, no matter
from what cause it may have arisen.58 This result logically
follows from the well-settled rule that where the law creates a
duty or charge, and the party is disabled from performing it
without any default in himself, and has no remedy over, then
the law will excuse him, but where the party by his own contract
creates a duty or charge upon himself, he is bound to make it
good notwithstanding any accident or delay by inevitable
necessity because he might have provided against it by contract.
Whether or not there has been such an undertaking on the part
of the carrier is to be determined from the circumstances
surrounding the case and by application of the ordinary rules
for the interpretation of contracts.59
Echoing the findings of the trial court, the respondent court
correctly declared that—
“In a similar case of delayed delivery of air cargo under a very
similar stipulation contained in the airway bill which reads: ‘The
carrier does not obligate itself to carry the goods by any specified
aircraft or on a specified time. Said carrier being hereby
authorized to deviate from the route of the shipment without any
liability therefor’, our Supreme Court ruled that common
carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously
assume the obligation. Said rights and obligations are created
by a specific contract entered into by the parties (Mendoza vs.
PAL, 90 Phil. 836).
“There is no showing by plaintiffs that such a special or specific
contract had been entered into between them and the defendant
airline companies.
“And this special contract for prompt delivery should call the
attention of the carrier to the circumstances surrounding the
case and approximate amount of damages to be suffered in case
of delay (See Mendoza vs. PAL, supra). There was no such
contract entered into in the instant case.”
Also, the theory of petitioners that the specification of the flights
and dates of departures and arrivals constitute a special
contract that could prevail over the printed stipulations at the
back of the airway bill is vacuous. To countenance such a
postulate would unduly burden the common carrier for that
would have the effect of unilaterally transforming every single
bill of lading or trip ticket into a special contract by the simple
expedient of filling it up with the particulars of the flight, trip or
voyage, and thereby imposing upon the carrier duties and/or
obligations which it may not have been ready or willing to
assume had it been timely advised thereof.
Neither does the fact that the challenged condition No. 5 was
printed at the back of the airway bill militate against its binding
effect on petitioners as parties to the contract, for there were
sufficient indications on the face of said bill that would alert
them to the presence of such additional condition to put them
on their guard. Ordinary prudence on the part of any person
entering or contemplating to enter into a contract would prompt
even a cursory examination of any such conditions, terms
and/or stipulations.
There is a holding in most jurisdictions that the acceptance of a
bill of lading without dissent raises a presumption that all terms
therein were brought to the knowledge of the shipper and agreed
to by him, and in the absence of fraud or mistake, he is estopped
from thereafter denying that he assented to such terms. This
rule applies with particular force where a shipper accepts a bill
of lading with full knowledge of its contents, and acceptance
under such circumstances makes it a binding contract. In order
that any presumption of assent to a stipulation in a bill of lading
limiting the liability of a carrier may arise, it must appear that
the clause containing this exemption from liability plainly
formed a part of the contract contained in the bill of lading. A
stipulation printed on the back of a receipt or bill of lading or on
papers attached to such receipt will be quite as effective as if
printed on its face, if it is shown that the consignor knew of its
terms. Thus, where a shipper accepts a receipt which states that
its conditions are to be found on the back, such receipt comes
within the general rule, and the shipper is held to have accepted
and to be bound by the conditions there to be found.
Granting arguendo that Condition No. 5 partakes of the nature
of a contract of adhesion and as such must be construed strictly
against the party who drafted the same or gave rise to any
ambiguity therein, it should be borne in mind that a contract of
adhesion may be struck down as void and unenforceable, for
being subversive of public policy, only when the weaker party is
imposed upon in dealing with the dominant bargaining party
and is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on equal
footing.62 However, Ong Yiu vs. Court of Appeals, et al.63
instructs us that contracts of adhesion are not entirely
prohibited. The one who adheres to the contract is in reality free
to reject it entirely; if he adheres, he gives his consent.
Accordingly, petitioners, far from being the weaker party in this
situation, duly signified their presumed assent to all terms of
the contract through their acceptance of the airway bill and are
consequently bound thereby. It cannot be gainsaid that
petitioners were not without several choices as to carriers in
Chicago with its numerous airways and airlines servicing the
same.
We wish to allay petitioners’ apprehension that Condition No. 5
of the airway bill is productive of mischief as it would validate
delay in delivery, sanction violations of contractual obligations
with impunity or put a premium on breaches of contract.
Just because we have said that Condition No. 5 of the airway
bill is binding upon the parties to and fully operative in this
transaction, it does not mean, and let this serve as fair warning
to respondent carriers, that they can at all times whimsically
seek refuge from liability in the exculpatory sanctuary of said
Condition No. 5 or arbitrarily vary routes, flights and schedules
to the prejudice of their customers. This condition only serves to
insulate the carrier from liability in those instances when
changes in routes, flights and schedules are clearly justified by
the peculiar circumstances of a particular case, or by general
transportation practices, customs and usages, or by
contingencies or emergencies in aviation such as weather
turbulence, mechanical failure, requirements of national
security and the like. And even as it is conceded that specific
routing and other navigational arrangements for a trip, flight or
voyage, or variations therein, generally lie within the discretion
of the carrier in the absence of specific routing instructions or
directions by the shipper, it is plainly incumbent upon the
carrier to exercise its rights with due deference to the rights, III. Petitioners challenge the validity of respondent court’s
interests and convenience of its customers. finding that private respondents are not liable for tort on
account of the humiliating, arrogant and indifferent acts of their
A common carrier undertaking to transport property has the
officers and personnel. They posit that since their mother’s
implicit duty to carry and deliver it within a reasonable time,
remains were transported ten hours earlier than originally
absent any particular stipulation regarding time of delivery, and
scheduled, there was no reason for private respondents’
to guard against delay. In case of any unreasonable delay, the
personnel to disclaim knowledge of the arrival or whereabouts
carrier shall be liable for damages immediately and proximately
of the same other than their sheer arrogance, indifference and
resulting from such neglect of duty.64 As found by the trial
extreme insensitivity to the feelings of petitioners. Moreover,
court, the delay in the delivery of the remains of Crispina
being passengers and not merely consignors of goods,
Saludo, undeniable and regrettable as it was, cannot be
petitioners had the right to be treated with courtesy, respect,
attributed to the fault, negligence or malice of private
kindness and due consideration.
respondents,65 a conclusion concurred in by respondent court
and which we are not inclined to disturb. In riposte, TWA claims that its employees have always dealt
politely with all clients, customers and the public in general.
We are further convinced that when TWA opted to ship the
PAL, on the other hand, declares that in the performance of its
remains of Crispina Saludo on an earlier flight, it did so in the
obligation to the riding public, other customers and clients, it
exercise of sound discretion and with reasonable prudence, as
has always acted with justice, honesty, courtesy and good faith.
shown by the explanation of its counsel in his letter of February
Respondent appellate court found merit in and reproduced the
19, 1977 in response to petitioners’ demand letter:
trial court’s refutation of this assigned error:
“Investigation of TWA’s handling of this matter reveals that
“About the only evidence of plaintiffs that may have reference to
although the shipment was scheduled on TWA Flight 131 of
the manner with which the personnel of defendants treated the
October 27, 1976, it was actually boarded on TWA Flight 603 of
two plaintiffs at the San Francisco Airport are the following
the same day, approximately 10 hours earlier, in order to assure
pertinent portions of Maria Saludo’s testimony.
that the shipment would be received in San Francisco in
sufficient time for transfer to PAL. This transfer was effected in ‘Q When you arrived there, what did you do, if any?
San Francisco at 2:00 P.M. on October 27, 1976.66
A I immediately went to the TWA counter and I inquiredabout
Precisely, private respondent TWA knew of the urgency of the whether my mother was there or if they knew anything about it.
shipment by reason of this notation on the lower portion of the
Q What was the answer?
airway bill: “All documents have been certified. Human remains
of Cristina (sic) Saludo. Please return bag first available flight to A They said they do not know. So, we waited.
SFO.” Accordingly, TWA took it upon itself to carry the remains
of Crispina Saludo on an earlier flight, which we emphasize it Q About what time was that when you reached San Francisco
could do under the terms of the airway bill, to make sure that from Chicago?
there would be enough time for loading said remains on the A I think 5 o’clock. Somewhere around that in the afternoon.
transfer flight on board PAL.
Q You made inquiry it was immediately thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to wait until the
TWA people could tell you the whereabouts?
A Sorry, Sir, but the TWA did not tell us anything. We stayed
there until about 9 o’clock. They have not heard anything about
it. They did not say anything.
Q Do you want to convey to the Court that from 5 up to 9 o’clock
in the evening you yourself went back to the TWA and they could
not tell you where the remains of your mother were?
A Yes sir.
Q And after nine o’clock, what did you do?
A I told my brother my Mom was supposed to be on the
Philippine Airlines flight. ‘Why don’t’ we check with PAL instead
to see if she was there?’ We tried to comfort each other. I told
him anyway that was a shortest flight from Chicago to
California. We will be with our mother on this longer flight. So,
we checked with the PAL.
Q What did you find?
A We learned, Yes, my Mom would be on the flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what was your flight from San Francisco to
the Philippines?
A I do not know the number. It was the evening flight of the
Philippine Airline(s) from San Francisco to Manila.
Q You took that flight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of your mother in San
Francisco could you tell us what did you feel?
A After we were told that my mother was not there?
Q After you learned that your mother could not fly with you from
Chicago to California?
A Well, I was very upset. Of course, I wanted the confirmation
that my mother was in the West Coast. The flight was about 5
hours from Chicago to California. We waited anxiously all that
time on the plane. I wanted to be assured about my mother’s
remains. But there was nothing and we could not get any
assurance from anyone about it.
Q Your feeling when you reached San Francisco and you could
not find out from the TWA the whereabouts of the remains, what
did you feel?
A Something nobody would be able to describe unless he
experiences it himself. It is a kind of panic. I think it’s a feeling
you are about to go crazy. It is something I do not want to live
through again.’ (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).
“The foregoing does not show any humiliating or arrogant
manner with which the personnel of both defendants treated the
two plaintiffs. Even their alleged indifference is not clearly
established. The initial answer of the TWA personnel at the
counter that they did not know anything about the remains, and
later, their answer that they have not heard anything about the
remains, and the inability of the TWA counter personnel to
inform the two plaintiffs of the whereabouts of the remains,
cannot be said to be total or complete indifference to the said
plaintiffs. At any rate, it is any rude or discourteous conduct,
malfeasance or neglect, the use of abusive or insulting language
calculated to humiliate and shame passenger or bad faith by or
on the part of the employees of the carrier that gives the
passenger an action for damages against the carrier (Zulueta vs.
Pan American World Airways, 43 SCRA 397; Air France vs.
Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan American
World Airways, 16 SCRA 431; Northwest Airlines, Inc. vs.
Cuenca, 14 SCRA 1063), and none of the above is obtaining in
We stand by respondent court’s findings on this point, but only
to the extent where it holds that the manner in which private
respondent TWA’s employees dealt with petitioners was not
grossly humiliating, arrogant or indifferent as would assume the
proportions of malice or bad faith and lay the basis for an award
of the damages claimed. It must however, be pointed out that
the lamentable actuations of respondent TWA’s employees leave
much to be desired, particularly so in the face of petitioners’ grief
over the death of their mother, exacerbated by the tension and
anxiety wrought by the impassé and confusion over the failure
to ascertain over an appreciable period of time what happened
to her remains.
Airline companies are hereby sternly admonished that it is their
duty not only to cursorily instruct but to strictly require their
personnel to be more accommodating towards customers,
passengers and the general public. After all, common carriers
such as airline companies are in the business of rendering
public service, which is the primary reason for their
enfranchisement and recognition in our law. Because the
passengers in a contract of carriage do not contract merely for
transportation, they have a right to be treated with kindness,
respect, courtesy and consideration.68 A contract to transport
passengers is quite different in kind and degree from any other
contractual relation, and generates a relation attended with
public duty. The operation of a common carrier is a business
affected with public interest and must be directed to serve the
comfort and convenience of passengers.69 Passengers are
human beings with human feelings and emotions; they should
not be treated as mere numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and
Saturnino Saludo, agonized for nearly five hours, over the
possibility of losing their mother’s mortal remains, unattended
to and without any assurance from the employees of TWA that
they were doing anything about the situation. This is not to say
that petitioners were to be regaled with extra special attention.
They were, however, entitled to the understanding and humane
consideration called for by and commensurate with the
extraordinary diligence required of common carriers, and not the
cold insensitivity to their predicament. It is hard to believe that
the airline’s counter personnel were totally helpless about the
situation. Common sense could and should have dictated that
they exert a little extra effort in making a more extensive inquiry,
by themselves or through their superiors, rather than just shrug
off the problem with a callous and uncaring remark that they
had no knowledge about it. With all the modern communications
equipment readily available to them, which could have easily
facilitated said inquiry and which are used as a matter of course
by airline companies in their daily operations, their apathetic
stance while not legally reprehensible is morally deplorable.
Losing a loved one, especially one’s parent, is a painful
experience. Our culture accords the tenderest human feelings
toward and in reverence to the dead. That the remains of the
deceased were subsequently delivered, albeit belatedly, and
eventually laid in her final resting place is of little consolation.
The imperviousness displayed by the airline’s personnel, even
for just that fraction of time, was especially condemnable
particularly in the hour of bereavement of the family of Crispina
Saludo, intensified by anguish due to the uncertainty of the
whereabouts of their mother’s remains. Hence, it is quite
apparent that private respondents’ personnel were remiss in the
observance of that genuine human concern and professional
attentiveness required and expected of them.
The foregoing observations, however, do not appear to be
applicable or imputable to respondent PAL or its employees. No
attribution of discourtesy or indifference has been made against
PAL by petitioners and, in fact, petitioner Maria Saludo testified
that it was to PAL that they repaired after failing to receive
proper attention from TWA. It was from PAL that they received
confirmation that their mother’s remains would be on the same
flight to Manila with them.
We find the following substantiation on this particular episode
from the deposition of Alberto A. Lim, PAL’s cargo supervisor
earlier adverted to, regarding their investigation of and the
action taken on learning of petitioner’s problem:

“ATTY. ALBERTO C. MENDOZA: Yes. Mr. Lim, what exactly was
your procedure adopted in your so called investigation?
ALBERTO A. LIM: I called the lead agent on duty at that time
and requested for a copy of airway bill, transfer manifest and
other documents concerning the shipment.
ATTY. ALBERTO C. MENDOZA: Then, what?
ALBERTO A. LIM: They proceeded to analyze exactly where PAL
failed, if any, in forwarding the human remains of Mrs. Cristina
(sic) Saludo. And I found out that there was not (sic) delay in
shipping the remains of Mrs. Saludo to Manila. Since we
received the body from American Airlines on 28 October at 7:45
and we expedited the shipment so that it could have been loaded
on our flight leaving at 9:00 in the evening or just barely one
hour and 15 minutes prior to the departure of the aircraft. That
is so (sic) being the case, I reported to Manila these
circumstances.”
IV. Finally, petitioners insist, as a consequence of the delay in
the shipment of their mother’s remains allegedly caused by
wilful contractual breach, on their entitlement to actual, moral
and exemplary damages as well as attorney’s fees, litigation
expenses, and legal interest.
The uniform decisional tenet in our jurisdiction holds that moral
damages may be awarded for wilful or fraudulent breach of
contract or when such breach is attended by malice or bad
faith.However, in the absence of strong and positive evidence of
fraud, malice or bad faith, said damages cannot be awarded.
Neither can there be an award of exemplary damages nor of
attorney’s fees as an item of damages in the absence of proof
that defendant acted with malice, fraud or bad faith.
The censurable conduct of TWA’s employees cannot, however,
be said to have approximated the dimensions of fraud, malice or
bad faith. It can be said to be more of a lethargic reaction
produced and engrained in some people by the mechanically
routine nature of their work and a racial or societal culture
which stultifies what would have been their accustomed human
response to a human need under a former and different
ambience.
Nonetheless, the facts show that petitioners’ right to be treated
with due courtesy in accordance with the degree of diligence
required by law to be exercised by every common carrier was
violated by TWA and this entitles them, at least, to nominal
damages from TWA alone. Articles 2221 and 2222 of the Civil
Code make it clear that nominal damages are not intended for
indemnification of loss suffered but for the vindication or
recognition of a right violated or invaded. They are recoverable
where some injury has been done but the amount of which the
evidence fails to show, the assessment of damages being left to
the discretion of the court according to the circumstances of the
case. In the exercise of our discretion, we find an award of
P40,000.00 as nominal damages in favor of petitioners to be a
reasonable amount under the circumstances of this case.
WHEREFORE, with the modification that an award of
P40,000.00 as and by way of nominal damages is hereby
granted in favor of petitioners to be paid by respondent
Trans World Airlines, the appealed decision is AFFIRMED in
all other respects.
SO ORDERED.
Melencio-Herrera (Chairman), Paras, Padilla and Nocon, JJ.,
concur.
Decision affirmed with modification.
Note.—Petitioner carrier, not being privy to the transaction
between HSBC and CMI cannot be expected to look beyond what
is contained in the bill of lading in question and guess which of
the many banks in Metro Manila could possibly be the
consignee. (Eastern Shipping Lines, Inc. vs. Court of Appeals,
190 SCRA 512.)
Prudenciado vs. Alliance Transport System, Inc.
No. L-33836. March 16,1987.*
DRA. SOFIA L. PRUDENCIADO, petitioner, vs. ALLIANCE
TRANSPORT SYSTEM, INC. and JOSE LEYSON, et al.,
respondents.
Civil Law; Damages; Judgment; Factual findings of the Court of
Appeals are binding on the Supreme Court but they are subject to
scrutiny if such are diametrically opposed to those of the trial
court.—It is well settled that factual findings of the Court of
Appeals are binding on the Supreme Court, but said findings are
subject to scrutiny if such are diametrically opposed to those of
the trial court (Samson v. CA, et al., G.R. No. L-40071, January
29,1986).
Same; Same; Moral damages, concept of.—There is no argument
that moral damages include physical suffering, mental anguish,
fright, serious anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and similar injury.
Though incapable of pecuniary computation, moral damages
may be recovered if they are the proximate result of defendant's
wrongful act or omission (People v. Baylon, 129 SCRA 62
[1984]).
Same; Same; Same; Trial courts are given the discretion to
determine the amount of moral damages, and that the Court of
Appeals can only modify or change the amount awarded when
they are palpably and scandalously excessive; Awards of moral
and exemplary damages which are far too excessive, compared
to the actual losses of the aggrieved party, should be reduced to
more reasonable amounts.—In the same manner, it is
undisputed that the trial courts are given discretion to
determine the amount of moral damages (Alcantara v. Surro, 93
Phil. 472) and that the Court of Appeals can only modify or
change the amount awarded when they are palpably and
scandalously excessive "so as to indicate that it was the result
of passion, prejudice or corruption on the part of the trial court
(Gellada v. Warner Barnes & Co., Inc., 57 O.G. (4) 7347, 7358;
Sadie v. Bachrach Motors Co., Inc., 57 O.G. (4) 636 and Adone
v. Bachrach Motor Co., Inc., 57 O.G. 656). But in more recent
cases where the awards of moral and exemplary damages are far
too excessive compared to the actual losses sustained by the
aggrieved party, this Court ruled that they should be reduced to
more reasonable amounts.
Same; Same; Same; Purpose of award of moral damages.—In any
case the Court held that "moral damages are emphatically not
intended to enrich a complainant at the expense of a defendant.
They are awarded only to enable the injured party to obtain
means, diversion or amusements that will serve to alleviate the
moral suffering he has undergone, by reason of the defendants'
culpable action." The award of moral damages must be
proportionate to the suffering inflicted (R & B Surety &
Insurance Co., Inc. v. Intermediate Appellate Court, 129 SCRA
745 [1984] citing Grand Union Supermarket, Inc. vs. Espino,
Jr., 94 SCRA 966).
Same; Same; Same; Reduction of damages by the Court of
Appeals is both too drastic and unrealistic and cannot pass the
test of reasonableness.—On the other hand, it will be observed
that the reduction of the damages made by the Court of Appeals
is both too drastic and unrealistic, to pass the test of
reasonableness, which appears to be the underlying basis to
justify such reduction.
Same; Same; Same; Petitioner, a doctor by profession, is
undeniably a proper recipient of moral damages which are
proportionate to her suffering.—While the damages sought to be
recovered were not satisfactorily established to the extent
desired by the petitioner, it was nonetheless not disputed that
an accident occurred due to the fault and negligence of the
respondents; that Dra. Prudenciado suffered a brain concussion
which although mild, can admittedly produce the effects
complained of by her and that these symptoms can develop after
several years and can lead to some serious handicaps or
predispose the patient to other sickness (TSN, July 13, 1960,
pp. 5254). Being a doctor by profession, her fears can be more
real and intense than an ordinary person. Otherwise stated, she
is undeniably a proper recipient of moral damages which are
proportionate to her suffering.
Same; Same; Exemplary or corrective damages; Rationale behind
the award of said damages.—The rationale behind exemplary or
corrective damages is, as the name implies, to provide an
example or correction for the public good (Lopez, et al. v. Pan
American World Airways, 16 SCRA 431).
Same; Same; Same; Gross negligence by taxi driver in case at bar;
Frequent incidence of accidents caused by taxi drivers demands
corrective measures.—The Court of Appeals conforms with
aforesaid findings of the trial court but is not prepared to accept
that there was gross negligence on the part of the driver to justify
the imposition of exemplary damages. However, a driver running
at full speed on a rainy day, on a slippery road in complete
disregard of the hazards to life and limb of other people cannot
be said to be acting in anything less than gross negligence. The
frequent incidence of accidents of this nature caused by taxi
drivers indeed demands corrective measures.
PETITION for certiorari to review the decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
PARAS, J.:
This is a petition for review on certiorari of the decision1 of the
Court of Appeals dated May 4, 1971 in CA-G.R. No. 34832-R
entitled Dra. Sofia L. Prudenciado v. Alliance Transport System,
Inc. and Jose Leyson, which modified the decision2 of the Court
of First Instance of Rizal, Quezon City, in Civil Case No. Q-5235
reducing the amount of moral damages from P25,000 to P2,000
and eliminating the award of exemplary damages and attorney's
fees but granting actual damages of P2, 451.27.
The decretal portion of said decision reads:
"WHEREFORE, the decision appealed from is hereby modified,
ordering appellants jointly and severally to pay plaintiff the sum
of P2,451.27 for actual damages representing the cost of the
repair of the car of Plaintiff; (2) the sum of P2,000.00 as moral
damages. No pronouncement as to costs."
The antecedent facts of this case as found by the trial court and
by the Court of Appeals are as follows:
At about 2:05 p.m. of May 11, 1960, Dra. Sofia L. Prudenciado
was driving her own Chevrolet Bel Air car along Arroceros Street
with the intention of crossing Taft Avenue in order to turn left,
to go to the Philippine Normal College Compound where she
would hold classes. She claimed that she was driving her car at
the rate of 10 kmph; that before crossing Taft Ave. she stopped
her car and looked to the right and to the left and not noticing
any on-coming vehicle on either side she slowly proceeded on
first gear to cross the same, but when she was almost at the
center, near the island thereof, Jose Leyson who was driving
People's Taxicab owned and operated by Alliance Transport
System, Inc., suddenly bumped and struck Dra. Prudenciado's
car, thereby causing physical injuries in different parts of her
body, suffering more particularly brain concussion which
subjected her to several physical examinations and to an
encephalograph test while her car was damaged to the extent of
P2,451.27. The damage to the taxicab amounted to P190.00
(Decision in Civil Case No. Q-5235, CFI, Rizal; Record on Appeal,
pp. 63-64; Decision, CA-G.R. No. 34832-R, Rollo, pp. 37-38).
Dra. Prudenciado filed a complaint for damages at the Court of
First Instance of Rizal, Quezon City against the Alliance
Transport System and Jose Leyson docketed as aforestated,
Civil Case No. Q-5232 (Record on Appeal, pp. 2-11).
After due hearing, the Court of First Instance of Rizal, Quezon
City, found Jose Leyson guilty of negligence in the performance
of his duties as taxicab driver which is the proximate cause of
the accident in question. On the other hand, defendant Alliance
Transport System, Inc. failed to prove to the satisfaction of the
court that it had exercised the required diligence of a good father
of the family in the selection, supervision and control of its
employees including defendant Leyson. Consequently, both
defendants were held jointly and severally liable for the physical
injuries suffered by the plaintiff Dra. Sofia L. Prudenciado as
well as for the damage to her car, in addition to the other
consequential damages prayed for.
The dispositive portion of said decision reads:
"IN VIEW OF THE FOREGOING CONSIDERATIONS judgment is
rendered, one in favor of plaintiff and against the defendants, by
ordering the said defendants, jointly and severally, to pay the
plaintiff the sum of P2,451.27 for actual damages representing
the cost for the repair of the car of plaintiff; P25,000.00 as moral
damages; P5,000.00 as exemplary damages; and the further
sum of P3,000.00 as attorney's fees, with costs against the
defendants." (Record on Appeal, pp. 71-73).
On appeal, the Court of Appeals rendered the assailed decision
on May 14, 1971 and denied petitioner's motion for
reconsideration in its resolution dated July 20,1971.
Hence, this petition.
The petition was given due course in the resolution of this Court
dated September 6, 1971 and petitioner filed her brief on
November 10, 1971 (Rollo, p. 69) while respondents filed their
brief on January 24, 1972 (Rollo, p. 86). Petitioner filed her
Reply Brief on March 1, 1972 (Rollo, p. 96); after which the case
was considered submitted for decision on the same date (Rollo,
p. 99).
In her brief, petitioner raised the following assignment of errors:
I THE RESPONDENT COURT OF APPEALS ERRED IN
REDUCING THE AWARD OF MORAL DAMAGES TO THE
PETITIONER FROM P25,000.00 AWARDED BY THE COURT OF
FIRST INSTANCE OF RIZAL, BRANCH V, QUEZON CITY, TO
P2,000.00 NOTWITHSTANDING THE FACT THAT THERE WAS
NO FINDING THAT THE AWARD WAS PALPABLY AND
SCANDALOUSLY EXCESSIVE AS TO INDICATE THAT IT WAS
THE RESULT OF PASSION OR CORRUPTION ON THE PART OF
THE TRIAL COURT;
II THE RESPONDENT COURT OF APPEALS ERRED IN
ELIMINATING THE AWARD OF EXEMPLARY DAMAGES OF
P5,000.00 NOTWITHSTANDING THE FACT THAT THE FINDING
OF THE SAID COURT ON THE EVIDENCE AND THE LAW
APPLICABLE JUSTIFIED THE AWARD OF EXEMPLARY
DAMAGES AS HELD BY THE SAID TRIAL COURT;
III THE COURT OF APPEALS ERRED IN FINDING THAT HER
DEMOTION IN RANK AS A PROFESSOR IN THE UNITED
STATES WAS NOT SUBSTANTIATED AND IN MAKING THIS
FINDING A BASIS FOR THE REDUCTION OF THE AWARD OF
MORAL DAMAGES, NOTWITHSTANDING THAT IT IS ALREADY
TOO FAR-FETCHED AND IT MERELY CONFIRMS THE TRUTH
OF THE FACT THAT THE ACCUSED SUFFERED LOSS OF HER
USUAL LIVELINESS; VIVACITY, ACTIVITY SELF-CONFIDENCE
AND THAT SHE FEELS UNCERTAIN AND INSECURE AND THAT
SHE WAS SUBJECTED TO EXTREME FRIGHT AND SERIOUS
ANXIETY, SERIOUS APPREHENSION OF LOSING HER LIFE OR
HER SENSES OR REASON AND OF HER PHYSICAL MOBILITY
ANYTIME AND THAT SHE SUFFERED GREAT SHOCK AND
SEVERE PAINS ON HER BACK NEAR THE LEFT SIDE OF HER
SPINAL COLUMN OF THE LUMBAR REGION;
IV THE RESPONDENT COURT OF APPEALS ALSO ERRED IN
ELIMINATING THE AWARD OF ATTORNEY'S FEES TO THE
PETITIONERS NOTWITHSTANDING THE FACT THAT SAID
AWARD IS LEGAL AND PROPER;
V THE RESPONDENT COURT OF APPEALS ERRED IN
ELIMINATING THE COSTS TAXED AGAINST THE
RESPONDENTS NOTWITHSTANDING THE FACT THAT SAID
COSTS ARE LEGAL AND PROPER;
VI THE RESPONDENT COURT OF APPEALS ERRED IN FINDING
THAT THE CLAIM OF DR. SOFIA L. PRUDENCIADO OF HER
LOSS OF HER USUAL LIVELINESS, VIVACITY, ACTIVITY AND
HER USUAL SELF CONFIDENCE, SUCH THAT SHE NOW
FEELS UNCERTAIN AND INSECURE. . . EXTREME FRIGHT
AND SERIOUS ANXIETY, SERIOUS APPREHENSION OF
LOSING HER LIFE OR HER SENSES OR REASON; OF HER
PHYSICAL MOBILITY ANYTIME . . . GREAT SHOCK AND
SEVERE PAINS ON HER BACK NEAR THE LEFT SIDE OF HER
SPINAL COLUMN IN THE LUMBAR REGION IS
UNCORROBORATED NOTWITHSTANDING THE FACT OF THE
CERTIFICATE, EXHIBIT "G" OF DR. DOMINADOR VERGARA,
OF THE VETERANS MEMORIAL HOSPITAL AND DR. CONRADO
ARAMIL, BRAIN SPECIALIST AND THE CORROBORATING
TESTIMONY OF THE LATTER AFTER EXAMINATION AND
TREATMENT OF PETITIONER;
VII THE RESPONDENT COURT OF APPEALS ERRED IN SO
MODIFYING THE DECISION OF THE TRIAL COURT
NOTWITHSTANDING THE FACT THAT IT HAD NO POWER TO
DO SO UNDER THE FACTS AND CIRCUMSTANCES OF THIS
CASE AS FOUND BY THE COURT OF APPEALS;
VIII THE RESPONDENT COURT OF APPEALS ERRED IN
MODIFYING THE DECISION OF THE TRIAL COURT
NOTWITHSTANDING THE FACT THAT THE DECISION OF SAID
TRIAL COURT IS IN ACCORDANCE WITH LAW.
The Court of Appeals and the trial court are in accord in the
finding that the accident was caused by the negligence of the
taxi driver. The bone of contention is however in the award of
damages, which crystalizes the errors assigned into one main
issue, which is whether or not the Court of Appeals is justified
in modifying or changing the grant of damages by the trial court.
It is well settled that factual findings of the Court of Appeals are
binding on the Supreme Court, but said findings are subject to
scrutiny if such are diametrically opposed to those of the trial
court (Samson v. CA, et al., G.R. No. L-40071, January
29,1986).
The Court of Appeals concedes that a concussion of the brain
was suffered by Dra. Prudenciado but as to how serious was the
concussion or how it had later become, and the disastrous
extent of the injuries which she alleges to have sustained as a
result of the accident, are seriously doubted by said Appellate
Court. Specifically, said Court finds that Dra. Prudenciado's
claim (which was sustained by the trial court) that because of
aforesaid concussion, she eventually lost her usual liveliness,
vivacity, activity and her usual self-confidence, to the extent that
now she feels uncertain and insecure, not to mention a sense of
extreme fright and serious anxiety, serious apprehension of
losing her life, or her senses or reason or her physical mobility
momentarily, plus experiences of great shock and severe pains
on her back near the left side of her spinal column in the lumbar
region, was not supported by the deposition of Dr. Conrado
Aramil, the specialist who attended to the plaintiff from May 14
to May 26, 1960 (TSN, July 13, 1960, pp. 72-73). From said
deposition, it was gathered that Dra. Prudenciado suffered a
mild abnormality, compatible with mild concussion of the brain
(TSN, July 13, 1960, pp. 47-48); that the symptoms of any brain
concussion usually are headache, dizziness, vomiting and lack
of pep or alertness; and that the possible after effects that may
be produced are persistent or irregular headaches, fluctuating
dizziness. Accordingly, Dra. Prudenciado was advised "Just to
watch herself if she would develop any alarming symptoms such
as headache, dizziness or vomitings, to have her rechecked after
several months for her to be sure." (16 id, pp. 51-52). It might
also produce intellectual deterioration or lessening of
intelligence, and even insanity.
Dra. Prudenciado sought to establish that she had precisely
suffered all those after effects except insanity; but the Court of
Appeals ruled that her proof consisted merely in her own
uncorroborated testimony. In support of her allegation she could
not show any medical certificate tending to prove that she was
indeed medically treated abroad f or her brain ailment nor was
there any showing in the documents presented that she was
demoted to the rank of technical assistant because the San
Francisco State College does not believe in her mental capacity
any more.
Finally, her statements that she is almost completely losing her
voice, that she has a terrible headache when her head is
pressed, that she has lost her sense of taste, that she is nervous
and temperamental and that she has lapses of memory, are
belied by the deposition of Dr. Aramil that the patient's EEG was
already normal on May 26, 1960; and on cross-examination he
declared that she was clinically symtomless when she was
discharged from the hospital (TSN, July 13, 1960, pp. 75-76; 78-
79).
There is no argument that moral damages include physical
suffering, mental anguish, fright, serious anxiety, besmirched
reputation, wounded feelings, moral shock, social humiliation,
and similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate result
of defendant's wrongful act or omission (People v. Baylon, 129
SCRA 62 [1984]).
In the same manner, it is undisputed that the trial courts are
given discretion to determine the amount of moral damages
(Alcantara v. Surro, 93 Phil. 472) and that the Court of Appeals
can only modify or change the amount awarded when they are
palpably and scandalously excessive "so as to indicate that it
was the result of passion, prejudice or corruption on the part of
the trial court (Gellada v. Warner Barnes & Co., Inc., 57 O.G. (4)
7347, 7358; Sadie v. Bachrach Motors Co., Inc., 57 O.G. (4) 636
and Adone v. Bachrach Motor Co., Inc., 57 O.G. 656). But in
more recent cases where the awards of moral and exemplary
damages are far too excessive compared to the actual losses
sustained by the aggrieved party, this Court ruled that they
should be reduced to more reasonable amounts.
Thus, in the case of San Andres v. Court of Appeals (116 SCRA
85 [1982]) the Supreme Court ruled that while the amount of
moral damages is a matter left largely to the sound discretion of
a court, the same when found excessive should be reduced to
more reasonable amounts, considering the attendant facts and
circumstances. Moral damages, though incapable of pecuniary
estimation, are in the category of an award designed to
compensate the claimant for actual injury suffered and not to
impose a penalty on the wrongdoer.
In a much later case (Siguenza v. Court of Appeals, 137 SCRA
578-579 [1985]), the Supreme court, reiterating the above
ruling, reduced the awards of moral and exemplary damages
which were far too excessive compared to the actual losses
sustained by the aggrieved parties and where the records show
that the injury suffered was not serious or gross and, therefore,
out of proportion to the amount of damages generously awarded
by the trial court.
In any case the Court held that "moral damages are emphatically
not intended to enrich a complainant at the expense of a
defendant. They are awarded only to enable the injured party to
obtain means, diversion or amusements that will serve to
alleviate the moral suffering he has undergone, by reason of the
defendants' culpable action." The award of moral damages must
be proportionate to the suffering inflicted (R & B Surety &
Insurance Co., Inc. v. Intermediate Appellate Court, 129 SCRA
745 [1984] citing Grand Union Supermarket, Coming back to
the case at bar, a careful review of the records makes it readily
apparent that the injuries sustained by Dra. Prudenciado are
not as serious or extensive as they were claimed to be, to warrant
the damages awarded by the trial court. In fact, a closer scrutiny
of the exhibits showing a moderate damage to the car can by no
stretch of the imagination produce a logical conclusion that
such disastrous effects of the accident sought to be established,
actually took place, not to mention the fact that such were not
supported by the medical findings presented. Unquestionably,
therefore, the damages imposed by the lower court should be
reduced to more reasonable levels.
On the other hand, it will be observed that the reduction of the
damages made by the Court of Appeals is both too drastic and
unrealistic, to pass the test of reasonableness, which appears to
be the underlying basis to justify such reduction.
While the damages sought to be recovered were not satisfactorily
established to the extent desired by the petitioner, it was
nonetheless not disputed that an accident occurred due to the
fault and negligence of the respondents; that Dra. Prudenciado
suffered a brain concussion which although mild, can
admittedly produce the effects complained of by her and that
these symptoms can develop af ter several years and can lead to
some serious handicaps or predispose the patient to other
sickness (TSN, July 13, 1960, pp. 52-54). Being a doctor by
profession, her f ears can be more real and intense than an
ordinary person. Otherwise stated, she is undeniably a proper
recipient of moral damages which are proportionate to her suff
ering.
As to exemplary damages, Article 2231 of the Civil Code
provides:
"In quasi-delicts, exemplary damages may be granted if the
defendant acted with grave negligence."
The rationale behind exemplary or corrective damages is, as the
name implies, to provide an example or correction for the public
good (Lopez, et al. v. Pan American World Airways, 16 SCRA
431).
The findings of the trial court in the case at bar which became
the basis of the award of exemplary damages are to the effect
that it is more apparent from the facts, conditions and
circumstances obtaining in the record of the case that
respondent driver was running at high speed after turning to the
right along Taft Ave. coming from Ayala Boulevard, considering
that the traffic was clear. Failing to notice petitioner's car, he
failed to apply his brakes and did not even swerve to the right to
avoid the collision (Record on Appeal, pp. 89-70).
The Court of Appeals conforms with aforesaid findings of the
trial court but is not prepared to accept that there was gross
negligence on the part of the driver to justify the imposition of
exemplary damages.
PREMISES CONSIDERED, the assailed decision of the Court
of Appeals is hereby MODIFIED Insofar as the award of
damages is concerned; and respondents are ordered to
jointly and severally pay the petitioner; (1) the sum of
P2,451.27 for actual damages representing the cost of the
repair of her car; (2) the sum of P15,000.00 as moral
damages; (3) the sum of P5,000.00 as exemplary damages;
and (4) the sum of P3,000.00 as attorney's fees, No
pronouncement as to costs.
SO ORDERED.
Fernan (Chairman), Alampay, Gutierrez, Jr., Padilla, Bidin
and Cortes, JJ., concur.
Decision modified.
Notes.—While moral damages are incapable of pecuniary
estimation, they are recoverable, if they are the proximate result
of the defendant's wrongful act or omission. (Yutuk vs. Manila
Electric Company, 2 SCRA 337.)
While contributory negligence on the part of the injured party
justifies the reduction of moral damages in a breach of contract
of carriage, it does not justify the exemption from liability of the
driver. (Laguna-Tayabas Bus Co, vs. Cornista, 11 SCRA 181.)
——o0o——
Prudenciado vs. Alliance Transport System, Inc., 148 SCRA
440, No. L-33836 March 16, 1987

However, a driver running at full speed on a rainy day, on a

slippery road in complete disregard of the hazards to life and
limb of other people cannot be said to be acting in anything less
than gross negligence. The frequent incidence 01 accidents of
this nature caused by taxi drivers indeed demands corrective
measures.
Lopez, et al. vs. Pan American World Airways Selfenrichment or fraternal interest, and not personal illwill,
may have been the motive, but it is malice nevertheless.
No. L-22415. March 30, 1966.
FERNANDO LOPEZ, ET AL., plaintiffs and appellants, vs.
PAN AMERICAN WORLD AIRWAYS, defendant and appellant. Same; Moral damages and exemplary are recoverable for breach
of contract of carriage in bad faith.—As a proximate result of
Carriers; Breach of contract to provide first class
defendant’s breach in bad faith of its contracts with plaintiffs,
accommodations; Case at bar.—Plaintiffs made first class
the latter suffered social humiliation, wounded feelings, serious
reservations with defendant in its Tokyo-San Francisco flight.
anxiety and mental anguish. For plaintiffs were travelling with
The reservations having been confirmed, first class tickets were
first class tickets issued by defendant and yet they were given
subsequently issued in favor of plaintiffs. Through mistake,
only the tourist class. At stopovers, they were expected to be
however, defendant’s agents cancelled the said reservations.
among the first-class passengers by those awaiting to welcome
Expecting that some cancellations of bookings would be made
them, only to be found among the tourist passengers. It may not
before the flight time, the reservations supervisor decided to
be humiliating to travel as tourist passengers; it is humiliating
withhold from plaintiffs the information that their reservations
to be compelled to travel as such, contrary to what is rightfully
had been cancelled. Upon arrival in Tokyo, defendant informed
to be expected from the contractual undertaking.
plaintiffs that there was no accommodation for them in the first
class stating that they could not go unless they take the tourist The rationale behind exemplary or corrective damages is, as the
class. Due to pressing engagements in the United States, name implies, to provide an example or correction for public
plaintiffs were constrained to take the flight as tourist good. Defendant having breached its contracts in bad faith, the
passengers, but they did so under protest. Query: Whether court may award exemplary damages in addition to moral
defendant acted in bad faith in the breach of its contract with damages (Articles 2229, 2232, New Civil Code). In view of its
plaintiffs. Held: In so misleading plaintiffs into purchasing first nature, it should be imposed in such amount as to sufficiently
class tickets in the conviction that they had confirmed and effectively deter similar breach of contracts in the future by
reservations for the same, when in fact they had none, defendant defendant or other airlines.
wilfully and knowingly placed itself into the position of having to
Same; Attorney’s fees; When written contract for attorney’s fees
breach its aforesaid contracts with plaintiffs should there be no
controls the amount to be paid therefor is a case of breach of
last-minute cancellation by other passengers before flight time,
contract of carriage.—A written contract for attorney’s services
as it turned out in this case. Such actuation of defendant may
shall control the amount to be paid therefor unless found by the
indeed have been promoted by nothing more than the promotion
court to be unconscionable or unreasonable. A consideration of
of its self-interest in holding on to plaintiffs as passengers in its
the subject matter of the present controversy, of the professional
flight and foreclosing their chances to seek the services of other
standing of the attorney for plaintiffs-appellants, and of the
airlines that may have been able to afford them first class
extent of the services rendered by him, shows that the amount
accommodations. All the same, in legal contemplation, such
provided for in the written agreement is reasonable.
conduct already amounts to action in bad faith.
Same; Factors considered in fixing damages.—In the case at bar
Same; Meaning of bad faith.—Bad faith means a breach of a
the damages were determined by considering the official,
known duty through some motive of interest or illwill.
political, social and financial standing of the offended parties on
one hand and the business and financial position of the offender
on the other (Dominding vs. Ng, 55 O.G. 10).
APPEAL from a decision of the Court of First Instance of Rizal.
The facts are stated in the opinion of the Court.
Ross, Selph & Carrascoso for the defendant and appellant.
Vicente J. Francisco for the plaintiffs and appellants.
BENGZON, J.P., J.:
Plaintiffs and defendant appeal from a decision of the Court of
First Instance of Rizal. Since the value in controversy exceeds
P200,000 the appeals were taken directly to this Court upon all
questions involved (Sec. 17, par. 3[5], Judiciary Act).
Stated briefly the facts not in dispute are as follows:
Reservations for first class accommodations in Flight No. 2 of
Pan American World Airways—hereinafter otherwise called PAN-
AM—from Tokyo to San Francisco on May 24, 1960 were made
with PAN-AM on March 29, 1960, by “Your Travel Guide”
agency, specifically, by Delfin Faustino, for then Senator
Fernando Lopez, his wife Maria J. Lopez, his son-in-law Alfredo
Montelibano, Jr., and his daughter, Mrs. Alfredo Montelibano,
‘Jr., (Milagros Lopez Montelibano). PAN-AM’s San Francisco
head office confirmed the reservations on March 31, 1960.
First class tickets for the abovementioned flight were
subsequently issued by PAN-AM on May 21 and 23, 1960, in
favor of Senator Lopez and his party. The total fare of P9,444 for
all of them was fully paid before the tickets were issued.
As scheduled Senator Lopez and party left Manila by Northwest
Airlines on May 24, 1960, arriving in Tokyo at 5:30 P.M. of that
day. As soon as they arrived Sen-ator Lopez requested Minister
Busuego of the Philippine Embassy to contact PAN-AM’s Tokyo
office regarding their first class accommodations for that
evening’s flight. For the given reason that the first class seats
therein were all booked up, however, PAN-AM’s Tokyo office
informed Minister Busuego that PAN-AM could not
accommodate Senator Lopez and party in that trip as first class
passengers. Senator Lopez thereupon gave their first class
tickets to Minister Busuego for him to show the same to PAN-
AM’s Tokyo office, but the latter firmly reiterated that there was
no accommodation for them in the first class, stating that they
could not go in that flight unless they took the tourist class
therein.
Due to pressing engagements awaiting Senator Lopez and his
wife, in the United States—he had to attend a business
conference in San Francisco the next day and she had to
undergo a medical check-up in Mayo Clinic, Rochester,
Minnesota, on May 28, 1960 and needed three days rest before
that in San Francisco—Senator Lopez and party were
constrained to take PAN-AM’s flight from Tokyo to San Francisco
as tourist passengers. Senator Lopez however made it clear, as
indicated in his letter to PAN-AM’s Tokyo office on that date
(Exh. A), that they did so “under protest” and without prejudice
to further action against the airline.
Suit for damages was thereafter filed by Senator Lopez and party
against PAN-AM on June 2, 1960 in the Court of First Instance
of Rizal. Alleging breach of contracts in bad faith by defendant,
plaintiffs asked for P500,000 actual and moral damages,
P100,000 exemplary damages, P25,000 attorney’s fees plus
costs. PAN-AM filed its answer on June 22, 1960, asserting that
its failure to provide first class accommodations to plaintiffs was
due to honest error of its employees. It also interposed a
counterclaim for attorney’s fees of P25,000.
Subsequently, further pleadings were filed, thus: plaintiffs’
answer to the counterclaim, on July 25, 1960; plaintiffs’ reply
attached to motion for its admittance, on December 2, 1961;
defendant’s supplemental answer, on March 8, 1962; plaintiffs’
reply to supplemental answer, on March 10, 1962; and
defendant’s amended supplemental answer, on July 10, 1962.
After trial—which took twenty-two (22) days ranging from
November 25, 1960 to January 5, 1963—the Court of First
Instance rendered its decision on November 13, 1963, the
dispositive portion stating:
“In view of the foregoing considerations, judgment is hereby
rendered in favor of the plaintiffs and against the defendant,
which is accordingly ordered to pay the plaintiffs the following:
(a) P100,000 00 as moral damages; (b) P20,000.00 as exemplary
damages; (c) P25,000.00 as attorney’s fees, and the costs of this
action.
“So ordered.”
Plaintiffs, however, on November 21, 1963, moved for
reconsideration of said judgment, asking that moral damages be
increased to P400,000 and that six per cent (6%) interest per
annum on the amount of the award be granted. And defendant
opposed the same. Acting thereon the trial court issued an order
on December 14, 1963, reconsidering the dispositive part of its
decision to read as follows:
“In view of the foregoing considerations, judgment is hereby
rendered in favor of the plaintiffs and against the defendant,
which is accordingly ordered to pay the plaintiffs the following:
(a) P150,000.00 as moral damages; (b) P25,000.00 as exemplary
damages; with legal interest on both from the date of the filing
of the complaint until paid; and (c) P25,000.00 as attorney’s
fees; and the costs of this action.
“So ordered.”
It is from said judgment, as thus reconsidered, that both parties
have appealed.
Defendant, as stated, has from the start admitted that it
breached its contracts with plaintiffs to provide them with first
class accommodations in its Tokyo-San Francisco flight of May
24, 1960. In its appeal, however, it takes issue with the finding
of the court a quo that it acted in bad faith in the branch of said
contracts. Plaintiffs, on the other hand, raise questions on the
amount of damages awarded in their favor, seeking that the
same be increased to a total of P650,000.
Anent the issue of bad faith the records show the respective
contentions of the parties as follows.
According to plaintiffs, defendant acted in bad faith because it
deliberately refused to comply with its contract to provide first
class accommodations to plaintiffs, out of racial prejudice
against Orientals. And in support of its contention that what
was done to plaintiffs is an oft-repeated practice of defendant,
evidence was adduced relating to two previous instances of
alleged racial discrimination by defendant against Filipinos in
favor of “white” passengers. Said previous occasions are what
allegedly happened to (1) Benito Jalbuena and (2) Cenon S. Cer-
vantes and his wife.
And from plaintiffs’ evidence this is what allegedly happened;
Jalbuena bought a first class ticket from PANAM on April 13,
1960; he confirmed it on April 15, 1960 as to the Tokyo-
Hongkong flight of April 20, 1960; PANAM similarly confirmed it
on April 20, 1960. At the airport he and another Oriental—Mr.
Tung—were asked to step aside while other passengers—
including “white” passengers—boarded PAN-AM’s plane. Then
PAN-AM officials told them that one of them had to stay behind.
Since Mr. Tung was going all the way to London, Jalbuena was
chosen to be left behind. PAN-AM’s officials could only explain
by saying there was “some mistake”. Jalbuena thereafter wrote
PAN-AM to protest the incident (Exh. B).
As to Cenon S. Cervantes it would appear that in Flight No. 6 of
PAN-AM on September 29, 1958 from Bangkok to Hongkong, he
and his wife had to take tourist class, although they had first
class tickets, which they had previously confirmed, because
their seats in first class were given to “passengers from London.”
Against the foregoing, however, defendant’s evidence would seek
to establish its theory of honest mistake, thus:
The first class reservations of Senator Lopez and party were
made on March 29, 1960 together with those of four members
of the Rufino family, for a total of eight (8) seats, as shown in
their joint reservation card (Exh. 1). Subsequently, on March 30,
1960, two other Rufinos secured reservations and were given a
separate reservation card (Exh. 2). A new reservation card
consisting of two pages (Exhs. 3 and 4) was then made for the
original of eight passengers, namely, Senator Lopez and party
and four members of the Rufino family, the first page (Exh. 3)
referring to 2 Lopezes, 2 Montelibanos and 1 Rufino and the
second page (Exh. 4) referring to 3 Rufinos. On April 18, 1960
“Your Travel Guide” agency cancelled the reservations of the
Rufinos. A telex message was thereupon sent on that date to
PAN-AM’s head office at San Francisco by Mariano Herranz,
PAN-AM’s reservations employee at its office in Escolta, Manila.
(Annex A-Acker’s to Exh. 6.) In said message, however, Herranz
mistakenly cancelled all the seats that had been reserved, that
is, including those of Senator Lopez and party.
The next day—April 1960—Herranz discovered his mistake,
upon seeing the reservation card newly prepared by his co-
employee Pedro Asensi for Sen. Lopez and party to the exclusion
of the Rufinos (Exh. 5). It was then that Herranz sent another
telex wire to the San Francisco head office, stating his error and
asking for the reinstatement of the four (4) first class seats
reserved for Senator Lopez and party (Annex A-Velasco’s to Exh.
6). San Francisco head office replied on April 22, 1960 that
Senator Lopez and party are waitlisted and that said office is
unable to reinstate them (Annex B-Velasco’s to Exh. 6).
Since the flight involved was still more than a month away and
confident that reinstatement would be made, Herranz forgot the
matter and told no one about it except his co-employee, either
Armando Davila or Pedro Asensi or both of them (Tsn., 123-124,
127, Nov. 17, 1961).
Subsequently, on April 27, 1960, Armando Davila, PANAM’s
reservations employee working in the same Escolta office as
Herranz, phoned PAN-AM’s ticket sellers at its other office in the
Manila Hotel, and confirmed the reservations of Senator Lopez
and party.
PAN-AM’s reservations supervisor Alberto Jose, discovered
Herranz’s mistake after “Your Travel Guide” phone on May 18,
1960 to state that Senator Lopez and party were, going to depart
as scheduled. Accordingly, Jose sent a telex wire on that date to
PAN-AM’s head office at San Francisco to report the error and
asked said office to continue holding the reservations of Senator
Lopez and party (Annex B-Acker’s to Exh. 6). Said message was
reiterated by Jose in his telex wire of May 19, 1960 (Annex C-
Acker’s to Exh. 6). San Francisco head office replied on May 19,
1960 that it regrets being unable to confirm Senator Lopez and
party for the reason that the flight was solidly booked (Exh. 7).
Jose sent a third telex wire on May 20, 1960 addressed to PAN-
AM’s offices at San Francisco, New York (Idlewild Airport), Tokyo
and Hongkong, asking all-out assistance towards restoring the
cancelled spaces and for report of cancellations at their end
(Annex D-Acker’s to Exh. 6). San Francisco head office reiterated
on May 20, 1960 that it could not reinstate the spaces and
referred Jose to the Tokyo and Hongkong offices (Exh. 8). Also
on May 20, the Tokyo office of PAN-AM wired Jose stating it will
do everything possible (Exh. 9).
Expecting that some cancellations of bookings would be made
before the flight time, Jose decided to withhold from Senator
Lopez and party, or their agent, the information that their
reservations had been cancelled.
Armando Davila having previously confirmed Senator Lopez and
party’s first class reservations to PAN-AM’s ticket sellers at its
Manila Hotel office, the latter sold and issued in their favor the
corresponding first class tickets on the 21st and 23rd of May,
1960.
From the foregoing evidence of defendant it is in effect admitted
that defendant—through its agents—first cancelled plaintiffs’
reservations by mistake and thereafter deliberately and
intentionally withheld from plaintiffs or their travel agent the
fact of said cancellation, in fact they had none, defendant
wilfully and knowingly placed itself into the position of having to
breach its aforesaid contracts with plaintiffs should there be no
lastminute cancellation by other passengers before flight time,
as it turned out in this case. Such actuation of defendant may
indeed have been prompted by nothing more than the promotion
of its self-interest in holding on to Senator Lopez and party as
passengers in its flight and foreclosing on their chances to seek
the services of other airlines that may have been able to afford
them first class accommodations. All the time, in legal
contemplation such conduct already amounts to action m bad
faith. For bad faith means a bleach of a known duty through
some motive of interest or ill-will (Spiegel vs. Beacon
Participations, 8 NE 2d 895, 907). As stated in Kamm v. Flink.
113 N J.L. 582, 175 A. 62, 99 A.L.R. 1, 7: “Self-enrichment or
fraternal interest, and not personal ill-will, may well have been
the motive; but it is malice nevertheless.”
As of May 18, 1960 defendant’s reservations supervisor Alberto
Jose knew that plaintiffs’ reservations had been cancelled As of
May 20 he knew that the San Francisco head office stated with
finality that it could not reinstate plaintiffs’ cancelled
reservations And yet said reseivations supervisor made the
“decision”—to use his own word—to withhold the information
from the plaintiffs Said Alberto Jose in his testimony:
“Q Why did you not notify them?
“A Well, you see, sir, in my fifteen (15) years of service with the
air lines business my experience is that even if the flights are
solidly booked months in advance, usually the flight departs
with plenty of empty seats both on the first class and tourist
class. This is due to late cancellation of passengers, or because
passengers do not show up in the airport, and it was our hope
others come in from another flight and, therefore, are delayed
and, therefore, missed their connections. This experience of
mine, coupled with that wire from Tokyo that they would do
everything possible prompted me to withhold the information,
but unfortunately, instead of the first class seat that I was
hoping for and which I anticipated only the tourists class was
open on which Senator and Mrs. Lopez, Mr. and Mrs.
Montelibano were accommodated. Well, I fully realize now the
gravity of my decision in not advising Senator and Mrs. Lopez,
Mr. and Mrs. Montelibano nor their agents about the erroneous
cancellation and for which II would like them to know that I am
very sorry.
x x x x x
“Q So it was not your duty to notify Sen. Lopez and parties that
their reservations had been cancelled since May 18, 1960?
“A As I said before it was my duty. It was my duty but as I said
again with respect to that duty I have the power to make a
decision or use my discretion and judgment whether I should go
ahead and tell the passenger about the cancellation.” (Tsn., pp.
17-19, 28-29, March 15, 1962.)
At the time plaintiffs bought their tickets, defendant, therefore,
in breach of its known duty, made plaintiffs believe that their
reservation had not been cancelled. An additional indication of
this is the fact that upon the face of the two tickets of record,
namely, the ticket issued to Alfredo Montelibano, Jr. on May 21,
1960 (Exh. 22) and that issued to Mrs. Alfredo Monteliba-no,
Jr., on May 23, 1960 (Exh. 23), the reservation status is stated
as “OK”. Such willful-non-disclosure of the cancellation or
pretense that the reservations for plaintiffs stood—and not
simply the erroneous cancellation itself—is the factor to which
is attributable the breach of the resulting contracts. And, as
above-stated, in this respect defendant clearly acted in bad faith.
As if to further emphasize its bad faith on the matter, defendant
subsequently promoted the employee who cancelled plaintiffs’
reservations and told them nothing about it. The record shows
that said employee—Mariano Herranz—was not subjected to
investigation and suspension by defendant but instead was
given a reward in the form of an increase of salary in June of the
following year (Tsn., 86-88, Nov. 20, 1961).
At any rate, granting all the mistakes advanced by the
defendant, there would at least be negligence so gross and
reckless as to amount to malice or bad faith (Fores vs. Miranda,
L-12163, March 4, 1959; Necesito v. Paras, L-10605-06, June
30, 1958). Firstly, notwithstanding the entries m the reservation
cards (Exhs. 1 & 3) that the reservations cancelled are those of
the Rufinos only, Heri-anz made the mistake, after reading said third, a written contract for an attorney’s services shall control
entries, of sending a wire cancelling all the reservations, the amount to be paid therefor unless found by the court to be
including those of Senator Lopez and party (Tsn., pp. 108-109, unconscionable or unreasonable (Sec. 24, Rule 138, Rules of
Nov. 17, 1961). Secondly, after sending a wire to San Francisco Court).
head office on April 19, 1960 stating his error and asking for
First, then, as to moral damages. As a proximate result of
reinstatement, Herranz simply forgot about the matter.
defendant’s breach in bad faith of its contracts with plaintiffs,
Notwithstanding the reply of San Francisco head Office on April
the latter suffered social humiliation, wounded feelings, serious
22, 1960 that it cannot reinstate Senator Lopez and party
anxiety and mental anguish. For plaintiffs were travelling with
(Annex B-Velasco’s to Exh. 6), it was assumed and taken for
first class tickets issued by defendant and yet they were given
granted that reinstatement would be made. Thirdly, Armando
only the tourist class. At stop-overs they were expected to be
Davila confirmed plaintiff’s reservations in a phone call on April
among the firstclass passengers by those awaiting to welcome
27, 1960 to defendant’s ticket sellers, when at the time it
them, only to be found among the tourist passengers. It may not
appeared in plaintiffs’ reservation card (Exh. 5) that they were
be humiliating to travel as tourist passengers.; it is humiliating
only waitlisted passengers. Fourthly, defendant’s ticket sellers
to be compelled to travel as such, contrary to what is rightfully
issued plaintiffs’ tickets on May 21 and 23, 1960, without first
to be expected from the contractual undertaking.
checking their reservations just before issuing said tickets. And,
finally, no one among defendant’s agents notified Senator Lopez Senator Lopez was then Senate President Pro Tempore.
and party that their reservations had been cancelled, a International carriers like defendant know the prestige of such
precaution that could have averted their entering with defendant an office. For the Senate is not only the Upper Chamber of the
into contracts that the latter had already placed beyond its Philippine Congress, but the nation’s treaty-ratifying body. It
power to perform. may also be mentioned that in his aforesaid office Senator Lopez
was in a position to preside in impeachment cases should the
Accordingly, there being a clear admission in defendant’s
Senate sit as Impeachment Tribunal. And he was former Vice-
evidence of facts amounting to a bad faith on its part in regard
President of the Philippines. Senator Lopez was going to the
to the breach of its contracts with plaintiffs, it becomes
United States to attend a private business conference of the
unnecessary to further discuss the evidence adduced by
Binalbagan-Isabela Sugar Company; but his aforesaid rank and
plaintiffs to establish defendant’s bad faith. For what is admitted
position were by no means left behind, and in fact he had a
in the course of the trial does not need to be proved (Sec. 2, Rule
second engagement awaiting him in the United States: a
129, Rules of Court).
banquet tendered by Filipino friends in his honor as Senate
Addressing ourselves now to the question of damages, it is well President Pro Tempore (Tsn., pp. 14-15, NOV. 25, 1960). For the
to state at the outset those rules and principles. First, moral moral damages sustained by him, therefore, an award of
damages are recoverable in breach of contracts where the P100,000.00 is appropriate.
defendant acted fraudulently or in bad faith (Art. 2220, New Civil
Mrs. Maria J. Lopez, as wife of Senator Lopez, shared
Code). Second, in addition to moral damages, exemplary or
corrective damages may be imposed by way of example or Lopez, et al. vs. Pan American World Airways
correction for the public good, in breach of contract where the
defendant acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner (Articles 2229, 2232, New Civil Code). And,
his prestige and therefore his humiliation. In addition she
suffered physical discomfort during the 13-hour trip (5 hours
from Tokyo to Honolulu and 8 hours from Honolulu to San
Francisco). Although Senator Lopez stated that “she was quite
well” (Tsn., p. 22, Nov. 25, 1960)—he obviously meant relatively
well, since the rest of his statement is that two months before,
she was attacked by severe flu and lost 10 pounds of weight and
that she was advised by Dr. Sison to go to the United States as
soon as possible for medical check-up and relaxation (Ibid). In
fact, Senator Lopez stated, as shown a few pages after in the
transcript of his testimony, that Mrs. Lopez was sick when she
left the Philippines:
“A.
Well, my wife really felt very bad during the entire trip from
Tokyo to San Francisco. In the first place, she was sick when we
left the Philippines, and then with that discomfort which she
[experienced] or suffered during that evening, it was her worst
experience. I myself, who was not sick, could not sleep because
of the discomfort.” (Tsn., pp. 27-28, Nov. 25, 1960).
It is not hard to see that in her condition then a physical
discomfort sustained for thirteen hours may well be considered
a physical suffering. And even without regard to the noise and
trepidation inside the plane—which defendant contends, upon
the strength of expert testimony, to be practically the same in
first class and tourist class—the fact that the seating spaces in
the tourist class are quite narrower than in first class, there
being six seats to a row in the former as against four to a row in
the latter, and that in tourist class there is very little space for
reclining in view of the closer distance between rows (Tsn.r p.
24, Nov. 25, 1960), will suffice to show that the aforesaid
passenger indeed experienced physical suffering during the trip.
Added to this, of course, was the painful thought that she was
deprived by defendant—after having- paid for and expected the
same—of the most suitable place for her, the first class, where
evidently the best of everything would have been given her, the
best seat, service, food and treatment. Such difference in
comfort between first class and tourist class is too obvious to be
recounted, is in fact the reason for the former’s existence, and
is recognized by the airline in charging a higher fare for it and
by the passengers in paying said higher rate Accordingly,
considering the totality of her suffering and humiliation, an
award to Mrs. Maria J. Lopez of P50,000.00 for moral damages
will be reasonable.
Mr. and Mrs. Alfredo Montelibano, Jr., were travelling as
immediate members of the family of Senator Lopez. They formed
part of the Senator’s party as shown also by the reservation
cards of PAN-AM. As such they likewise shared his prestige and
humiliation. Although defendant contends that a few weeks
before the flight they had asked their reservations to be charged
from first class to tourist class—which did not materialize due
to alleged full booking in the tourist class—the same does not
mean they suffered no shared in having to take tourist class
during the flight. For by that time they had already been made
to pay for first class seats and therefore to expect first class
accommodations. As stated, it is one thing to take the tourist
class by free choice; a far different thing to be compelled to take
it notwithstanding having paid for first class seats. Plaintiffs-
appellants now ask P37,500.00 each for the two but we note that
in their motion for reconsideration .filed in the court a quo, they
were satisfied with P25,000.00 each for said persons. (Record on
Appeal, p. 102). For their social humiliation, therefore, the
award to them of P25,000.00 each is reasonable.
The rationale behind exemplary or corrective damages is, as the
name implies, to provide an example or correction for public
good. Defendant having breached its contracts in bad faith, the
court, as stated earlier, may award exemplary damages in
addition to moral damages (Articles 2229, 2232, New Civil Code).
In view of its nature, it should be imposed in such an amount
as to sufficiently and effectively deter similar breach of contracts
in the future by defendant or other airlines. In this light, we find
it just to award P75,000.00 as exemplary or corrective damages.
Now, as to attorney’s fees, the record shows a written contract
of services executed on June 1, 1960 (Exh. F) whereunder
plaintiffs-appellants engaged the services of their counsel—Atty. the following: (1) P200,000.00 as moral damages, divided
Vicente J. Francisco—and agreed to pay the sum of P25,000.00 among plaintiffs, thus: P100,000.00 for Senate President
as attorney’s fees upon the termination of the case in the Court Pro Tempore Fernando Lopez; P50,000.00 for his wife Maria
of First Instance, and an additional sum of P25,000.00 in the J. Lopez; P25.000.00 for his son-in-law Alfredo Montelibano,
event the case is appealed to the Supreme Court. As said earlier, Jr.; and P25,000.00 for his daughter Mrs. Alfredo
a written contract for attorney’s services shall control the Montelibano, Jr.; (2) P75,000.00 as exemplary or corrective
amount to be paid therefor unless found by the court to be damages; (3) interest at the legal rate of 6% per annum on
unconscionable or unreasonable. A consideration of the subject the moral and exemplary damages aforestated, from
matter of the present controversy, of the professional standing December 14, 1963, the date of the amended decision of the
of the attorney for plaintiffs-appellants, and of the extent of the court a quo, until said damages are fully paid; (4) P50,000.00
service rendered by him, shows that said amount provided for as attorney’s fees; and (5) the costs. Counterclaim
in the written agreement is reasonable. Said lawyer—whose dismissed. So ordered.
prominence in the legal profession is well known—studied the
Chief Justice Bengzon and Justices Bautista Angelo,
case, prepared and filed the complaint, conferred with
Concepcion, J.B.L. Reyes, Barrera, Regala, Makalintal, Zaldivar
witnesses, analyzed documentary evidence, personally appeared
and Sanchez, concur. Justice Dizon is on leave.
at the trial of the case in twenty-two days during a period of
three years, prepared four sets of cross-interrogatories for Judgment modified.
deposition taking, prepared several memoranda and the motion
for reconsideration, filed a joint record on appeal with defendant, Note.—As to cases similar to the Lopez case, see Northwest
filed a brief for plaintiffs as appellants consisting of 45 printed Airlines, Inc. vs. Cuenca, L-22425, Aug. 31, 1965 and Air France
pages and a brief for plaintiffs as appellees consisting of 265 vs. Carrascoso, L-21438, Sept. 28, 1966. Lopez, et al. vs. Pan
printed pages. And we are further convinced of its American World Airways, 16 SCRA 431, No. L-22415 March 30,
reasonableness because defendant’s counsel likewise valued at 1966
P50,000.00 the proper compensation for his services rendered
to defendant in the trial court and on appeal.
In concluding, let it be stressed that the amount of damages
awarded in this appeal has been determined by adequately
considering the official, political, social, and financial standing
of the offended parties on one hand, and the business and
financial position of the offender on the other (Domingding v. Ng,
55 O.G. 10). And further considering the present rate of
exchange and the terms at which the amount of damages
awarded would approximately be in U.S. dollars, this Court is
all the more of the view that said award is proper and
reasonable.

Wherefore, the judgment appealed from is hereby modified

so as to award in favor of plaintiffs and against defendant,
Eastern Shipping Lines, Inc. vs. Court of Appeals
G.R. No. 97412. July 12, 1994.*
EASTERN SHIPPING LINES, INC., petitioner, vs. HON.
COURT OF APPEALS AND MERCANTILE INSURANCE
COMPANY, INC., respondents.
Common Carriers; Obligations; Presumption of Fault; When the
goods shipped either are lost or arrive in damaged condition, a
presumption arises against the carrier of its failure to observe that
requisite diligence, and there need not be an express finding of
negligence to hold it liable.—The common carrier’s duty to
observe the requisite diligence in the shipment of goods lasts
from the time the articles are surrendered to or unconditionally
placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a
reasonable time for their acceptance by, the person entitled to
receive them (Arts. 1736-1738, Civil Code; Ganzon vs. Court of
Appeals, 161 SCRA 646; Kui Bai vs. Dollar Steamship Lines, 52
Phil. 863). When the goods shipped either are lost or arrive in
damaged condition, a presumption arises against the carrier of
its failure to observe that diligence, and there need not be an
express finding of negligence to hold it liable (Art. 1735, Civil
Code; Philippine National Railways vs. Court of Appeals, 139
SCRA 87; Metro Port Service vs. Court of Appeals, 131 SCRA
365). There are, of course, exceptional cases when such
presumption of fault is not observed but these cases,
enumerated in Article 1734 of the Civil Code, are exclusive, not
one of which can be applied to this case.
Same; Same; Arrastre Operator; Carrier and arrastre operator
liable in solidum for the proper delivery of the goods to the
consignee.—The question of charging both the carrier and the
arrastre operator with the obligation of properly delivering the
goods to the consignee has, too, been passed upon by the Court.
In Fireman’s Fund Insurance Co. vs. Metro Port Service, Inc.
(182 SCRA 455), we have explained, in holding the carrier and
the arrastre operator liable in solidum, thus: “The legal
relationship between the consignee and the arrastre operator is
akin to that of a depositor and warehouseman (Lua Kian v.
Manila Railroad Co., et al., 19 SCRA 5 [1967]. The relationship
between the consignee and the common carrier is similar to that
of the consignee and the arrastre operator (Northern Motors, Inc.
v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty
of the ARRASTRE to take good care of the goods that are in its
custody and to deliver them in good condition to the consignee,
such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the
obligation to deliver the goods in good condition to the
consignee.”
Same; Same; Same; The Supreme Court is not implying, however,
that the arrastre operator and the customs broker are themselves
always and necessarily liable solidarily with the carrier, or vice-
versa, nor that attendant facts in a given case may not vary the
rule.—We do not, of course, imply by the above pronouncement
that the arrastre operator and the customs broker are
themselves always and necessarily liable solidarily with the
carrier, or vice-versa, nor that attendant facts in a given case
may not vary the rule. The instant petition has been brought
solely by Eastern Shipping Lines which, being the carrier and
not having been able to rebut the presumption of fault, is, in any
event, to be held liable in this particular case. A factual finding
of both the court a quo and the appellate court, we take note, is
that “there is sufficient evidence that the shipment sustained
damage while in the successive possession of appellants” (the
herein petitioner among them). Accordingly, the liability
imposed on Eastern Shipping Lines, Inc., the sole petitioner in
this case, is inevitable regardless of whether there are others
solidarily liable with it.
Damages; Interest Rates; Rules of thumb for future guidance in
the award of damages and interest rates.—The ostensible
discord is not difficult to explain. The factual circumstances may
have called for different applications, guided by the rule that the
courts are vested with discretion, depending on the equities of
each case, on the award of interest. Nonetheless, it may not be
unwise, by way of clarification and reconciliation, to suggest the
following rules of thumb for future guidance.
Same; Same; Same; When an obligation is breached, the
contravenor can be held liable for damages.—When an
obligation, regardless of its source, i.e., law, contracts, quasi-
contracts, delicts or quasi-delicts is breached, the contravenor
can be held liable for damages. The provisions under Title XVIII
on “Damages” of the Civil Code govern in determining the
measure of recoverable damages.
Same; Same; Same; Interests in the Concept of Actual and
Compensatory Damages; In a loan or forbearance of money, the
interest due should be that stipulated in writing, and in the
absence thereof, the rate shall be 12% per annum.—With regard
particularly to an award of interest in the concept of actual and
compensatory damages, the rate of interest, as well as the
accrual thereof, is imposed, as follows: 1. When the obligation is
breached, and it consists in the payment of a sum of money, i.e.,
a loan or forbearance of money, the interest due should be that
which may have been stipulated in writing. Furthermore, the
interest due shall itself earn legal interest from the time it is
judicially demanded. In the absence of stipulation, the rate of
interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to
the provisions of Article 1169 of the Civil Code.
Same; Same; Same; Same; In case of other obligations, the
interest on the amount of damages may be imposed at the
discretion of the court at the rate of 6% per annum.—When an
obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may
be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated
claims or damages except when or until the demand can be
established with reasonable certainty. Accordingly, where the
demand is established with reasonable certainty, the interest
shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is
made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification
of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.
Same; Same; Same; Same; When the judgment of the court
awarding a sum of money becomes final and executory, the rate
of legal interest shall be 12% per annum from such finality until
its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.—When the judgment of the
court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph
1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to
be by then an equivalent to a forbearance of credit.
PETITION for review of a decision of the Court of Appeals.
The facts are stated in the opinion of the Court.
Alojado & Garcia and Jimenea, Dala & Zaragoza for
petitioner.
Zapa Law Office for private respondent.
VITUG,J.:
The issues, albeit not completely novel, are: (a) whether or not a
claim for damage sustained on a shipment of goods can be a
solidary, or joint and several, liability of the common carrier, the
arrastre operator and the customs broker; (b) whether the
payment of legal interest on an award for loss or damage is to be
computed from the time the complaint is filed or from the date
the decision appealed from is rendered; and (c) whether the
applicable rate of interest, referred to above, is twelve percent
(12%) or six percent (6%).
The findings of the court a quo, adopted by the Court of Appeals,
on the antecedent and undisputed facts that have led to the
controversy are hereunder reproduced: “This is an action
against defendants shipping company, arrastre operator and
broker-forwarder for damages sustained by a shipment while in
defendants’ custody, filed by the insurer-subrogee who paid the
consignee the value of such losses/damages.
“On December 4, 1981, two fiber drums of riboflavin were
shipped from Yokohama, Japan for delivery vessel ‘SS EASTERN
COMET’ owned by defendant Eastern Shipping Lines, Inc. under
Bill of Lading No. YMA-8 (Exh. B). The shipment was insured
under plaintiff’s Marine Insurance Policy No. 81/01177 for
P36,382,466.38.
“Upon arrival of the shipment in Manila on December 12, 1981,
it was discharged unto the custody of defendant Metro Port
Service, Inc. The latter excepted to one drum, said to be in bad
order, which damage was unknown to plaintiff.
“On January 7, 1982 defendant Allied Brokerage Corporation
received the shipment from defendant Metro Port Service, Inc.,
one drum opened and without seal (per ‘Request for Bad Order
Survey.’ (Exh. D).
“On January 8 and 14, 1982, defendant Allied Brokerage
Corporation made deliveries of the shipment to the consignee’s
warehouse. The latter excepted to one drum which contained
spillages, while the rest of the contents was adulterated/fake
(per ‘Bad Order Waybill’ No. 10649, Exh. E).
“Plaintiff contended that due to the losses/damage sustained by
said drum, the consignee suffered losses totaling P19,032.95,
due to the fault and negligence of defendants. Claims were
presented against defendants who failed and refused to pay the
same (Exhs. H, I, J, K, L).
“As a consequence of the losses sustained, plaintiff was
compelled to pay the consignee P19,032.95 under the
aforestated marine insurance policy, so that it became
subrogated to all the rights of action of said consignee against
defendants (per ‘Form of Subrogation,’ ‘Release’ and Philbanking
check, Exhs. M, N, and O).” (pp. 85-86, Rollo.)
There were, to be sure, other factual issues that confronted both
courts. Here, the appellate court said:
“Defendants filed their respective answers, traversing the
material allegations of the complaint contending that: As for
defendant Eastern Shipping it alleged that the shipment was
discharged in good order from the vessel unto the custody of
Metro Port Service so that any damage/losses incurred after the
shipment was incurred after the shipment was turned over to
the latter, is no longer its liability (p. 17, Record); Metroport
averred that although subject shipment was discharged unto its
custody, portion of the same was already in bad order (p. 11,
Record); Allied Brokerage alleged that plaintiff has no cause of
action against it, not having negligent or at fault for the
shipment was already in damage and bad order condition when
received by it, but nonetheless, it still exercised extra ordinary
care and diligence in the handling/delivery of the cargo to
consignee in the same condition shipment was received by it.
“From the evidence the court found the following:
“‘The issues are:
‘1.Whether or not the shipment sustained losses/damages;
‘2.Whether or not these losses/damages were sustained
while in the custody of defendants (in whose respective custody,
if determinable);
‘3.Whether or not defendant(s) should be held liable for the
losses/damages (see plaintiff’s pre-Trial Brief, Records, p. 34;
Allied’s pre-Trial Brief, adopting plaintiff’s Records, p. 38).’
‘As to the first issue, there can be no doubt that the shipment
sustained losses/damages. The two, drums were shipped in
good order and condition, as clearly shown by the Bill of Lading
and Commercial Invoice which do not indicate any damages
drum that was shipped (Exhs. B and C). But when on December
12, 1981 the shipment was delivered to defendant Metro Port
Service, Inc., it excepted to one drum in bad order.
 1. The amount of P19,032.95, with the present legal interest of
12% per annum from October 1, 1982, the date of filing of this
‘Correspondingly, as to the second issue, it follows that the
complaints, until fully paid (the liability of defendant Eastern
losses/damages were sustained while in the respective and/or
Shipping, Inc. shall not exceed US$500 per case or the CIF value
successive custody and possession of defendants carrier
of the loss, whichever is lesser, while the liability of defendant
(Eastern), arrastre operator (Metro Port) and broker (Allied
Metro Port Service, Inc. shall be to the extent of the actual
Brokerage). This becomes evident when the Marine Cargo
invoice value of each package, crate box or container in no case
Survey Report (Exh. G), with its ‘Additional Survey Notes,’ are
to exceed P5,000.00 each, pursuant to Section 6.01 of the
considered. In the latter notes, it is stated that when the
Management Contract);
shipment was ‘landed on vessel’ to dock of Pier # 15, South
Harbor, Manila on December 12, 1981,’ it was observed that ‘one 2. P3,000.00 as attorney’s fees, and
(1) fiber drum (was) in damaged condition, covered by the
3. Costs.
vessel’s Agent’s Bad Order Tally Sheet No. 86427.’ The report
further states that when defendant Allied Brokerage withdrew B.Dismissing the counterclaims and crossclaim of
the shipment from defendant arrastre operator’s custody on defendant/cross-claimant Allied Brokerage Corporation.
January 7, 1982, one drum was found opened without seal, cello
bag partly torn but contents intact. Net unrecovered spillage was SO ORDERED.’ (p. 207, Record).
15 kgs. The report went on to state that when the drums reached “Dissatisfied, defendant’s recourse to US.
the consignee, one drum was found with adul-terated/faked
contents. It is obvious, therefore, that these losses/ damages “The appeal is devoid of merit.
occurred before the shipment reached the consignee while under
“After a careful scrutiny of the evidence on record. We find that
the successive custodies of defendants. Under Art. 1737 of the
the conclusion drawn therefrom is correct. As there is sufficient
New Civil Code, the common carrier’s duty to observe
evidence that the shipment sustained damage while in the
extraordinary diligence in the vigilance of goods remains in full
successive possession of appellants, and therefore they are
force and effect even if the goods are temporarily unloaded and
liable to the appellee, as subrogee for the amount it paid to the
stored in transit in the warehouse of the carrier at the place of
consignee.” (pp. 87-89, Rollo.)
destination, until the consignee has been advised and has had
reasonable opportunity to remove or dispose of the goods (Art. The Court of Appeals thus affirmed in toto the judgment of the
1738, NCC). Defendant Eastern Shipping’s own exhibit, the court a quo.
‘Turn-Over Survey of Bad Order Cargoes’ (Exhs. 3-Eastern)
states that on December 12, 1981 one drum was found ‘open.’ In this petition, Eastern Shipping Lines, Inc., the common
carrier, attributes error and grave abuse of discretion on the part
“and thus held: of the appellate court when—
‘WHEREFORE, PREMISES CONSIDERED, judgment is hereby I. IT HELD PETITIONER CARRIER JOINTLY AND SEVERALLY
rendered: LIABLE WITH THE ARRASTRE OPERATOR AND CUSTOMS
BROKER FOR THE CLAIM OF PRIVATE RESPONDENT AS
A.Ordering defendants to pay plaintiff, jointly and severally:
GRANTED IN THE QUESTIONED DECISION;
II. IT HELD THAT THE GRANT OF INTEREST ON THE CLAIM SCRA 455), we have explained, in holding the carrier and the
OF PRIVATE RESPONDENT SHOULD COMMENCE FROM THE arrastre operator liable in solidum, thus:
DATE OF THE FILING OF THE COMPLAINT AT THE RATE OF
“The legal relationship between the consignee and the arrastre
TWELVE PERCENT PER ANNUM INSTEAD OF FROM THE DATE
operator is akin to that of a depositor and warehouseman (Lua
OF THE DECISION OF THE TRIAL COURT AND ONLY AT THE
Kian v. Manila Railroad Co., 19 SCRA 5 [1967]. The relationship
RATE OF SIX PERCENT PER ANNUM, PRIVATE
between the consignee and the common carrier is similar to that
RESPONDENT’S CLAIM BEING INDISPUTABLY
of the consignee and the arrastre operator (Northern Motors, Inc.
UNLIQUIDATED.
v. Prince Line, et al., 107 Phil. 253 [1960]). Since it is the duty
The petition is, in part, granted. of the ARRASTRE to take good care of the goods that are in its
custody and to deliver them in good condition to the consignee,
In this decision, we have begun by saying that the questions
such responsibility also devolves upon the CARRIER. Both the
raised by petitioner carrier are not all that novel. Indeed, we do
ARRASTRE and the CARRIER are therefore charged with the
have a fairly good number of previous decisions this Court can
obligation to deliver the goods in good condition to the
merely tack to.
consignee.”
The common carrier’s duty to observe the requisite diligence in
We do not, of course, imply by the above pronouncement that
the shipment of goods lasts from the time the articles are
the arrastre operator and the customs broker are themselves
surrendered to or unconditionally placed in the possession of,
always and necessarily liable solidarily with the carrier, or vice-
and received by, the carrier for transportation until delivered to,
versa, nor that attendant facts in a given case may not vary the
or until the lapse of a reasonable time for their acceptance by,
rule. The instant petition has been brought solely by Eastern
the person entitled to receive them (Arts. 1736-1738, Civil Code;
Shipping Lines which, being the carrier and not having been
Ganzon vs. Court of Appeals, 161 SCRA 646; Kui Bai vs. Dollar
able to rebut the presumption of fault, is, in any event, to be
Steamship Lines, 52 Phil. 863). When the goods shipped either
held liable in this particular case. A factual finding of both the
are lost or arrive in damaged condition, a presumption arises
court a quo and the appellate court, we take note, is that “there
against the carrier of its failure to observe that diligence, and
is sufficient evidence that the shipment sustained damage while
there need not be an express finding of negligence to hold it
in the successive possession of appellants” (the herein petitioner
liable (Art. 1735, Civil Code; Philippine National Railways vs.
among them). Accordingly, the liability imposed on Eastern
Court of Appeals, 139 SCRA 87; Metro Port Service, Inc. vs.
Shipping Lines, Inc., the sole petitioner in this case, is inevitable
Court of Appeals, 131 SCRA 365). There are, of course,
regardless of whether there are others solidarily liable with it.
exceptional cases when such presumption of fault is not
observed but these cases, enumerated in Article 17341 of the It is over the issue of legal interest adjudged by the appellate
Civil Code, are exclusive, not one of which can be applied to this court that deserves more than just a passing remark.
case.
Let us first see a chronological recitation of the major rulings of
The question of charging both the carrier and the arrastre this Court:
operator with the obligation of properly delivering the goods to
The early case of Malayan Insurance Co., Inc., vs. Manila Port
the consignee has, too, been passed upon by the Court. In
Service,2 decided3 on 15 May 1969, involved a suit for recovery
Fireman’s Fund Insurance, Co. vs. Metro Port Service, Inc. (182
of money arising out of short deliveries and pilferage of goods.
In this case, appellee Malayan Insurance (the plaintiff in the
lower court) averred in its complaint that the total amount of its
claim for the value of the undelivered goods amounted to
P3,947.20. This demand, however, was neither established in its
totality nor definitely ascertained. In the stipulation of facts later
entered into by the parties, in lieu of proof, the amount of
P1,447.51 was agreed upon. The trial court rendered judgment
ordering the appellants (defendants) Manila Port Service and
Manila Railroad Company to pay appellee Malayan Insurance
the sum of P1,447.51 with legal interest thereon from the date
the complaint was filed on 28 December 1962 until full payment
thereof. The appellants then assailed, inter alia, the award of
legal interest. In sustaining the appellants, this Court ruled:
“Interest upon an obligation which calls for the payment of
money, absent a stipulation, is the legal rate. Such interest
normally is allowable from the date of demand, judicial or
extrajudicial. The trial court opted for judicial demand as the
starting point.
“But then upon the provisions of Article 2213 of the Civil Code,
interest ‘cannot be recovered upon unliquidated claims or
damages, except when the demand can be established with
reasonable certainty.’ And as was held by this Court in Rivera
vs. Perez,4 L-6998, February 29, 1956,if the suit were for
damages, ‘unliquidated and not known until definitely
ascertained, assessed and determined by the courts after proof
(Montilla c. Corporacion de P. P. Agustinos, 25 Phil. 447;
Lichauco v. Guzman, 38 Phil. 302),’ then, interest ‘should be
from the date of the decision.’” (Italics supplied)
The case of Reformina vs. Tomol,5 rendered on 11 October 1985,
was for “Recovery of Damages for Injury to Person and Loss of
Property.” After trial, the lower court decreed: Enrique
Fernando, Francisco Capistrano, Claudio Teehankee and
Antonio Barredo. Chief Justice Roberto Concepcion and Justice
Fred Ruiz Castro were on official leave.
“WHEREFORE, judgment is hereby rendered in favor of the
plaintiffs and third party defendants and against the defendants
and third party plaintiffs as follows:
“Ordering defendants and third party plaintiffs Shell and
Michael, Incorporated to pay jointly and severally the following
persons:
“(a).....
“x x x xxx
“(g)Plaintiffs Pacita F. Reformina and Francisco Reformina the
sum of P131,084.00 which is the value of the boat F B Pacita III
together with its accessories, fishing gear and equipment minus
P80,000.00 which is the value of the insurance recovered and
the amount of P10,000.00 a month as the estimated monthly
loss suffered by them as a result of the fire of May 6, 1969 up to
the time they are actually paid or alreadythe total sum of
P370,000.00 as of June 4, 1972 with legal interest from the filing
of the complaint until paid and to pay attorney’s fees of
P5,000.00 with costs against defendants and third party
plaintiffs.” (Italics supplied.)
On appeal to the Court of Appeals, the latter modified the
amount of damages awarded but sustained the trial court in
adjudging legal interest from the filing of the complaint until
fully paid. When the appellate court’s decision became final, the
case was remanded to the lower court for execution, and this
was when the trial court issued its assailed resolution which
applied the 6% interest per annum prescribed in Article 2209 of
the Civil Code. In their petition for review on certiorari, the
petitioners contended that Central Bank Circular No. 416,
providing thus—
“By virtue of the authority granted to it under Section 1 of Act
2655, as amended, Monetary Board in its Resolution No. 1622
dated July 29, 1974, has prescribed that the rate of interest for
the loan, or forbearance of any money, goods, or credits and the
rate allowed in judgments, in the absence of express contract as
to such rate of interest, shall be twelve (12%) percent per
annum. This Circular shall take effect immediately.” (Italics
found in the text) should have, instead, been applied. This
Court6 ruled:
“The judgments spoken of and referred to are judgments in
litigations involving loans or forbearance of any money, goods or
credits. Any other kind of monetary judgment which has nothing
to do with, nor involving loans or forbearance of any money,
goods or credits does not fall within the coverage of the said law
for it is not within the ambit of the authority granted to the
Central Bank.
“x x x xxx xxx
“Coming to the case at bar, the decision herein sought to be
executed is one rendered in an Action for Damages for injury to
persons and loss of property and does not involve any loan,
much less forbear-ances of any money, goods or credits. As
correctly argued by the private respondents, the law applicable
to the said case is Article 2209 of the New Civil Code which
reads—
‘Art.2209.—If the obligation consists in the payment of a sum of
money, and the debtor incurs in delay, the indemnity for
damages, there being no stipulation to the contrary, shall be the
payment of interest agreed upon, and in the absence of
stipulation, the legal interest which is six percent per annum.’”
The above rule was reiterated in Philippine Rabbit Bus Lines,
Inc., v. Cruz,7 promulgated on 28 July 1986. The case was for
damages occasioned by an injury to person and loss of property.
The trial court awarded private respondent Pedro Manabat
actual and compensatory damages in the amount of P72,500.00
withlegal interest thereon from the filing of the complaint until
fully paid. Relying on the Reformina v. Tomol case, this Court8
modified the interest award from 12% to 6% interest per annum
but sustained the time computation thereof, i.e., from the filing
of the complaint until fully paid.
In Nakpil and Sons vs. Court of Appeals,9 the trial court, in an
action for the recovery of damages arising from the collapse of a
building, ordered, inter alia, the “defendant United Construction
Co., Inc. (one of the petitioners) x x x to pay the plaintiff, x x x,
the sum of P989,335.68 with interest at the legal rate from
November 29, 1968, the date of the filing of the complaint until
full payment x x x.” Save from the modification of the amount
granted by the lower court, the Court of Appeals sustained the
trial court’s decision. When taken to this Court for review, the
case, on 03 October 1986, was decided, thus:
“WHEREFORE, the decision appealed from is hereby MODIFIED
and considering the special and environmental circumstances
of this case, we deem it reasonable to render a decision
imposing, as We do hereby impose, upon the defendant and the
third-party defendants (with the exception of Roman Ozaeta) a
solidary (Art. 1723, Civil Code, Supra, p. 10) indemnity in favor
of the Philippine Bar Association of FIVE MILLION
(P5,000,000.00) Pesos to cover all damages (with the exception
of attorney’s fees) occasioned by the loss of the building
(including interest charges and lost rentals) and an additional
ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for
attorney’s fees, the total sum being payable upon the finality of
this decision. Upon failure to pay on such finality, twelve (12%)
per cent interest per annum shall be imposed upon
aforementioned amounts from finality until paid. Solidary costs
against the defendant and third-party defen-dants (except
Roman Ozaeta).”
A motion for reconsideration was filed by United Construction,
contending that “the interest of twelve (12%) percent per annum
imposed on the total amount of the monetary award was in
contravention of law.” The Court10 ruled out the applicability of
the Reformina and Philippine Rabbit Bus Lines cases and, in its
resolution of 15 April 1988, it explained:
“There should be no dispute that the imposition of 12% interest
pursuant to Central Bank Circular No. 416 x x x is applicable
only in the following: (1) loans; (2) forbearance of any money,
goods or credit; and (3) rate allowed in judgments (judgments
spoken of refer to judgments involving loans or forbearance of
any money, goods or credits. (Philippine Rabbit Bus Lines Inc.
v. Cruz, 143 SCRA 160-161 [1986]; Reformina v. Tomol, Jr., 139
SCRA 260 [1985]). It is true that in the instant case, there is
neither a loan or a forbearance, but then no interest is actually
imposed provided the sums referred to in the judgment are paid
upon the finality of the judgment. It is delay in the payment of
such final judgment, that will cause the imposition of the
interest. “It will be noted that in the cases already adverted to,
the rate of interest is imposed on the total sum, from the filing
of the complaint until paid; in other words, as part of the
judgment for damages. Clearly, they are not applicable to the
instant case.”
The subsequent case of American Express International, Inc.,
vs. Intermediate Appellate Court 11 was a petition for review on
certiorari from the decision, dated 27 February 1985, of the then
Intermediate Appellate Court reducing the amount of moral and
exemplary damages awarded by the trial court, to P240,000.00
and P100,000.00, respectively, and its resolution, dated 29 April
1985, restoring the amount of damages awarded by the trial
court, i.e., P2,000,000.00 as moral damages and P400,000.00
as exemplary damages with interest thereon at 12% per annum
from notice of judgment, plus costs of suit. In a decision of 09
November 1988, this Court, while recognizing the right of the
private respondent to recover damages, held the award,
however, for moral damages by the trial court, later sustained
by the IAC, to be inconceivably large. The Court12 thus set aside
the decision of the appellate court and rendered a new one,
“ordering the petitioner to pay private respondent the sum of
One Hundred Thousand (P100,000.00) Pesos as moral damages,
with six (6%) percent interest thereon computed from the finality
of this decision until paid.”
Reformina came into fore again in the 21 February 1989 case of
Florendo v.Ruiz 13 which arose from a breach of employment
contract. For having been illegally dismissed, the petitioner was
awarded by the trial court moral and exemplary damages
without, however, providing any legal interest thereon. When the
decision was appealed to the Court of Appeals, the latter held:
“WHEREFORE, except as modified hereinabove the decision of
the CFI of Negros Oriental dated October 31, 1972 is affirmed in
all respects, with the modification that defendants-appellants,
except defendant-appellant Merton Munn, are ordered to pay,
jointly and severally, the amounts stated in the dispositive
portion of the decision, including the sum of P1,400.00 in
concept of compensatory damages, with interest at the legal rate
from the date of the filing of the complaint until fully paid.”
The petition for review to this Court was denied. The records
were thereupon transmitted to the trial court, and an entry of
judgment was made. The writ of execution issued by the trial
court directed that only compensatory damages should earn
interest at 6% per annum from the date of the filing of the
complaint. Ascribing grave abuse of discretion on the part of the
trial judge, a petition forcertiorari assailed the said order. This
Court said:
“x x x, it is to be noted that the Court of Appeals ordered the
payment of interest ‘at the legal rate’ from the time of the filing
of the complaint. x x x. Said circular [Central Bank Circular No.
416] does not apply to actions based on a breach of employment
contract like the case at bar.”
The Court reiterated that the 6% interest per annum on the
damages should be computed from the time the complaint was
filed until the amount is fully paid.
Quite recently, the Court had another occasion to rule on the
matter.National Power Corporation vs. Angas,14 decided on 08
May 1992, involved the expropriation of certain parcels of land.
After conducting a hearing on the complaints for eminent
domain, the trial court ordered the petitioner to pay the private
respondents certain sums of money as just compensation for
their lands so expropriated “with legal interest thereon x x x until
fully paid.” Again, in applying the 6% legal interest per annum general. Observe, too, that in these cases, a common time frame
under the Civil Code, the Court15 declared: in the computation of the 6% interest per annum has been
applied, i.e., from the time the complaint is filed until the
“x x x, (T)he transaction involved is clearly not a loan or
adjudged amount is fully paid.
forbearance of money, goods or credits but expropriation of
certain parcels of land for a public purpose, the payment of
which is without stipulation regarding interest, and the interest
The“second group,” did not alter the pronounced rule on the
adjudged by the trial court is in the nature of indemnity for
application of the 6% or 12% interest per annum,17 depending
damages. The legal interest required to be paid on the amount
on whether or not the amount involved is a loan or forbearance,
of just compensation for the properties expropriated is
on the one hand, or one of indemnity for damage, on the other
manifestly in the form of indemnity for damages for the delay in
hand. Unlike, however, the “first group” which remained
the payment thereof. Therefore, since the kind of interest
consistent in holding that the running of the legal interest
involved in the joint judgment of the lower court sought to be
should be from the time of the filing of the complaint until fully
enforced in this case is interest by way of damages, and not by
paid, the “second group” varied on the commencement of the
way of earnings from loans, etc. Art. 2209 of the Civil Code shall
running of the legal interest.
apply.”
Malayan held that the amount awarded should bear legal
Concededly, there have been seeming variances in the above
interest from the date of the decision of the court a quo,
holdings. The cases can perhaps be classified into two groups
explaining that “if the suit were for damages, ‘unliquidated and
according to the similarity of the issues involved and the
not known until definitely ascertained, assessed and determined
corresponding rulings rendered by the court. The “first group”
by the courts after proof,’ then, interest ‘should be from the date
would consist of the cases of Reformina v. Tomol (1985),
of the decision.’” American Express International v. IAC,
Philippine Rabbit Bus Lines v. Cruz (1986), Florendo v. Ruiz
introduced a different time frame for reckoning the 6% interest
(1989) and National Power Corporation v. Angas (1992). In the
by ordering it to be “computed from the finality of (the) decision
“second group” would be Malayan Insurance Company v. Manila
until paid.” The Nakpil and Sons case ruled that 12% interest
Port Service (1969), Nakpil and Sons v. Court of Appeals (1988),
per annum should be imposed from the finality of the decision
and American Express International v. Intermediate Appellate
until the judgment amount is paid.
Court (1988).
The ostensible discord is not difficult to explain. The factual
In the “first group,” the basic issue focuses on the application of
circumstances may have called for different applications, guided
either the 6% (under the Civil Code) or 12% (under the Central
by the rule that the courts are vested with discretion, depending
Bank Circular) interest per annum. It is easily discernible in
on the equities of each case, on the award of interest.
these cases that there has been a consistent holding that the
Nonetheless, it may not be unwise, by way of clarification and
Central Bank Circular imposing the 12% interest per annum
reconciliation, to suggest the following rules of thumb for future
applies only to loans or forbearance16 of money, goods or
guidance.
credits, as well as to judgments involving such loan or
forbearance of money, goods or credits, and that the 6% interest I. When an obligation, regardless of its source, i.e., law,
under the Civil Code governs when the transaction involves the contracts, quasi-contracts, delicts or quasi-delicts18 is
payment of indemnities in the concept of damage arising from breached, the contravenor can be held liable for damages.19 The
the breach or a delay in the performance of obligations in
provisions under Title XVIII on “Damages” of the Civil Code WHEREFORE, the petition is partly GRANTED. The appealed
govern in determining the measure of recoverable damages.20 decision is AFFIRMED with the MODIFICATION that the
legal interest to be paid is SIX PERCENT (6%) on the amount
II. With regard particularly to an award of interest in the concept
due computed from the decision, dated 03 February 1988,
of actual and compensatory damages, the rate of interest, as well
of the courta quo. A TWELVE PERCENT (12%) interest, in
as the accrual thereof, is imposed, as follows:
lieu of SIX PERCENT (6%), shall be imposed on such amount
1.When the obligation is breached, and it consists in the upon finality of this decision until the payment thereof.
payment of a sum of money, i.e., a loan or forbearance of money,
SO ORDERED.
the interest due should be that which may have been stipulated
in writing.21 Furthermore, the interest due shall itself earn legal Narvasa (C.J.), Cruz, Feliciano, Padilla, Bidin, Regalado,
interest from the time it is judicially demanded.22 In the Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno and
absence of stipulation, the rate of interest shall be 12% per Kapunan, JJ., concur.
annum to be computed from default, i.e., from judicial or
Mendoza, J., Took no part in deliberations.
extrajudicial demand under and subject to the provisions of
Article 116923 of the Civil Code. Petition partly granted.
2.When an obligation, not constituting a loan or forbearance of Notes.—Where the obligation arose from a contract or purchase
money, is breached, an interest on the amount of damages and sale and not from a contract of loan or mutuum, the
awarded may be imposed at the discretion of the court24 at the applicable rate is 6% per annum as provided in Article 2209 of
rate of 6% per annum.25 No interest, however, shall be adjudged the Civil Code and not the rate of 12% per annum as provided
on unliquidated claims or damages except when or until the in Circular No. 416 (Pilipinas Bank vs. Court of Appeals, 225
demand can be established with reasonable certainty.26 SCRA 268 [1993]).
Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim While common carriers are required to observe extraordinary
is made judicially or extrajudicially (Art. 1169, Civil Code) but diligence and are presumed at fault, no such presumption
when such certainty cannot be so reasonably established at the applies to private carriers (Planters Products, Inc. vs. Court of
time the demand is made, the interest shall begin to run only Appeals, 226 SCRA 476 [1993]).
from the date the judgment of the court is made (at which time
the quantification of damages may be deemed to have been
reasonably ascertained). The actual base for the computation of ——o0o——
legal interest shall, in any case, be on the amount finally
adjudged.
Eastern Shipping Lines, Inc. vs. Court of Appeals, 234 SCRA
3.When the judgment of the court awarding a sum of money
78, G.R. No. 97412 July 12, 1994
becomes final and executory, the rate of legal interest, whether
the case falls under paragraph 1 or paragraph 2, above, shall be
12% per annum from such finality until its satisfaction, this
interim period being deemed to be by then an equivalent to a
forbearance of credit.